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Merger profitability in industries with brand portfolios and loyal customers

  • Konrad, Kai A.

We study the equilibrium effects of mergers between firms with brand portfolios and brand loyal customers for pricing and profitability. We find that the merger paradox (Salant, Switzer and Reynolds 1983) is absent in these markets. The acquisition of brand portfolios can be profit enhancing for the merging firms and payoff neutral for the firms not involved in the merger. This may explain the emergence of brand conglomerates such as Richemont, PPR or LVMH.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" with number SP II 2010-08.

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Date of creation: 2010
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Handle: RePEc:zbw:wzbfff:spii201008
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