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The Incentives for Takeover in Oligopoly

  • Roman Inderst
  • Christian Wey

This paper presents a model of takeover incentives in an oligopolistic industry, which,in contrast to previous approaches, takes both insiders' and outsiders' gains from anincrease in industry concentration into account. Our main application is to comparetakeover incentives in a differentiated Cournot and Bertrand oligopoly model withlinear demand and costs. We provide a complete analysis for arbitrary numbers of firms,complements and substitutes, and degrees of product differentiation. An increase inconcentration is more likely under Cournot competition if products are complementsand more likely under Bertrand competition if products are substitutes. Moreover, asproducts become closer substitutes, a takeover becomes more likely under Bertrand andless likely under Cournot competition. ZUSAMMENFASSUNG - (Übernahmeanreize im Oligopol) In dieser Arbeit wird ein Modell zur Analyse von Fusionsanreizen vorgestellt, in dem - im Gegensatz zu vorhergehenden Untersuchungen - sowohl die Gewinnzuwächse der an der Fusion beteiligten Firmen als auch die Gewinnveränderungen der Konkurrenzunternehmen die Übernahmewahrscheinlichkeit bestimmen. Die wichtigste Anwendung ist der Vergleich der Übernahmeanreize im Cournot- und Bertrand-Oligopol mit differenzierten Gütern und linearen Nachfrage- und Kostenfunktionen. Die Arbeit bietet eine vollständige Analyse für eine beliebige Anzahl von Unternehmen, komplementäre und substituierbare Güter und unterschiedliche Grade der Produktdifferenzierung. Eine Zunahme der Konzentration in einer Industrie ist wahrscheinlicher bei Cournot-Konkurrenz, wenn die Güter komplementär sind, und wahrscheinlicher bei Bertrand-Konkurrenz, wenn die Güter substituierbar sind. Des weiteren steigt (sinkt) die Übernahmewahrscheinlichkeit mit zunehmender Substituierbarkeit der Güter bei Bertrand- (Cournot-) Konkurrenz.

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Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 01-24.

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Length: 51 pages
Date of creation: Dec 2001
Date of revision:
Publication status: Published in the International Journal of Industrial Organization , Vol. 22(8-9), Nov. 2004, pp. 1067-1089.
Handle: RePEc:wzb:wzebiv:fsiv01-24
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