Merger, spin-off and divestiture: insights from a spatial model

Andreea Cosnita-Langlais ()

Economics Bulletin, 2006, vol. 4, issue 9, pages 1-9

Abstract: Mergers and spin-offs are typically opposite strategies for firms, and are not simultaneously profitable in a standard linear Cournot model. We propose a simple spatial Cournot framework, where merger is profitable but subsequent divisionalization is even more. However, this is true only for partial spin-off, not for total divisionalization, due to the opportunity for specific efficiency gains in a spatial setting. Finally, the resulting market structure is analyzed in terms of a post-merger divestiture required by the merger control authority. We show here the divestiture can be profitable for firms even if the merger was not, while still fulfilling its corrective role.

Keywords: divestiture; divisionalization; merger profitability; multi-store competition; spatial efficiency gains (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2006-02-08

Downloads: (external link)
http://economicsbulletin.vanderbilt.edu/2006/volume4/EB-05D40048A.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ebl:ecbull:v:4:y:2006:i:9:p:1-9

Access Statistics for this article

More articles in Economics Bulletin from Economics Bulletin
Address: Economics Bulletin, Department of Economics, 414 Calhoun Hall, Vanderbilt University, Nashville TN 37235, USA
Series data maintained by John Conley ().