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The consequences of endogenous timing for diversification strategies of multimarket firms

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  • Neubauer, Silke

Abstract

When firms diversify into new markets in spite of the existence of diseconomies of scope, not only firms' profits are affected, but also potential welfare is reduced. Nevertheless, multimarket competition is the outcome of a game when players move simultaneously. A Cournot model is developped where players can choose the timing of their action before deciding over quantities. This helps firms to avoid the inefficiencies that ocur with multimarket competition. Whenever the timing game has an impact on the outcome of the basic game, the consequences for welfare are positive.

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  • Neubauer, Silke, 1997. "The consequences of endogenous timing for diversification strategies of multimarket firms," Discussion Papers, various Research Units FS IV 97-34, Social Science Research Center Berlin (WZB).
    • Handle: RePEc:zbw:wzbdiv:fsiv9734
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    1. Boyer, Marcel & Moreaux, Michel, 1987. "Being a leader or a follower: Reflections on the distribution of roles in duopoly," International Journal of Industrial Organization, Elsevier, vol. 5(2), pages 175-192.
    2. Dixon, Huw David, 1994. "Inefficient Diversification in Multi-market Oligopoly with Diseconomies of Scope," Economica, London School of Economics and Political Science, vol. 61(242), pages 213-219, May.
    3. Robson, Arthur J, 1990. "Duopoly with Endogenous Strategic Timing: Stackelberg Regained," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 263-274, May.
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    1. Neubauer, Silke, 1997. "Interdivisional information sharing: the strategic advantage of knowing nothing," Discussion Papers, Research Unit: Market Dynamics FS IV 97-33, Social Science Research Center Berlin (WZB).

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