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Mergers In Asymmetric Stackelberg Markets
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Mergers In Asymmetric Stackelberg Markets

Author

Listed:
  • Ramón Faulí-Oller

    (Universidad de Alicante)

  • Marc Escrihuela

    (Universidad de Alicante)

Abstract

It is well known that the profitability of horizontal mergers with quantity competition is scarce. However, in an asymmetric Stackelberg market we obtain that some mergers are profitable. Our main result is that mergers among followers become profitable when the followers are inefficient enough. In this case, leaders reduce their output when followers merge and this reduction renders the merger profitable. This merger increases price and welfare is reduced.

Suggested Citation

  • Ramón Faulí-Oller & Marc Escrihuela, 2007. "Mergers In Asymmetric Stackelberg Markets," Working Papers. Serie AD 2007-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2007-14
    as

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    References listed on IDEAS

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    8. Fauli-Oller, Ramon, 1997. "On merger profitability in a Cournot setting," Economics Letters, Elsevier, vol. 54(1), pages 75-79, January.
    9. Dong-Sung Cho & Dong-Jae Kim & Dong Kee Rhee, 1998. "Latecomer Strategies: Evidence from the Semiconductor Industry in Japan and Korea," Organization Science, INFORMS, vol. 9(4), pages 489-505, August.
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    Citations

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    Cited by:

    1. Liu, Chih-Chen & Wang, Leonard F.S., 2015. "Leading merger in a Stackelberg oligopoly: Profitability and consumer welfare," Economics Letters, Elsevier, vol. 129(C), pages 1-3.
    2. Nicolas Le Pape & Kai Zhao, 2010. "Cost-saving or Cost-enhancing Mergers: the Impact of the Distribution of Roles in Oligopoly," TEPP Working Paper 2010-18, TEPP.
    3. Gamal Atallah, 2015. "Multi-Firm Mergers with Leaders and Followers," Working Papers E1501E, University of Ottawa, Department of Economics.
    4. Le Pape, Nicolas & Zhao, Kai, 2014. "Horizontal mergers and uncertainty," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-31.
    5. Marc Escrihuela-Villar, 2013. "On merger in a collusive Stackelberg market," Economics Bulletin, AccessEcon, vol. 33(3), pages 2394-2401.
    6. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.
    7. Tsuyoshi Toshimitsu & Tetsuya Nakajima, 2021. "On the “merger paradox” in price competition with asymmetric product differentiation," Australian Economic Papers, Wiley Blackwell, vol. 60(1), pages 153-162, March.
    8. Walter Ferrarese, 2020. "When Multiple Merged Entities Lead in Stackelberg Oligopolies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(1), pages 131-142, February.
    9. Marco Marini & Giorgio Rodano, 2012. "Sequential vs Collusive Payoffs in Symmetric Duopoly Games," DIAG Technical Reports 2012-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    10. Walter Ferrarese, 2017. "Endogenous Mergers and Leadership Acquisition in Cournot Oligopolies," CEIS Research Paper 398, Tor Vergata University, CEIS, revised 06 Dec 2017.
    11. Mariana Cunha & Hélder Vasconcelos, 2018. "Sequential Mergers and Antitrust Authority’s Decisions in Stackelberg Markets," Journal of Industry, Competition and Trade, Springer, vol. 18(3), pages 373-394, September.
    12. José Méndez-Naya, 2018. "Mergin Firms' Strategies and the Merger Paradox [Estratégias de Empresas Fundidas e o Paradoxo das Fusões]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 28(3), pages 1001-1015, September.
    13. Walter Ferrarese, 2021. "Merger Waves Through Market Leadership," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(3), pages 371-385, November.
    14. Mariana Cunha & Hélder Vasconcelos, 2015. "Mergers in Stackelberg Markets with Efficiency Gains," Journal of Industry, Competition and Trade, Springer, vol. 15(2), pages 105-134, June.
    15. Marc Escrihuela-Villar, 2019. "On Mergers in a Stackelberg Market with Asymmetric Convex Costs," Journal of Industry, Competition and Trade, Springer, vol. 19(1), pages 21-32, March.

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    More about this item

    Keywords

    Mergers; Asymmetries; Stackelberg.;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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