The profitability of mergers in symmetric Cournot oligopoly

Simon Cowan

No 1041, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: General conditions that are sufficient for mergers in symmetric Cournot industries to be profitable or unprofitable are found and applied. If inverse demand curvature is weakly higher than the number of firms then all mergers are profitable. The same condition implies that outputs are strategic complements locally. If demand is log-concave, so inverse demand curvature is at most 1, two-firm mergers are unprofitable. Log-concavity of demand implies that outputs are strategic substitutes. The issue of the profitability of mergers in Cournot was first addressed by Salant, Switzer, and Reynolds (1983) in a model with linear demand.

Date: 2024-02-28
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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