Conglomerate Mergers and Foreclosure

Tommy Staahl Gabrielsen ()

Norway; Department of Economics, University of Bergen from Department of Economics, University of Bergen

Abstract: The article offers a complementary theory for conglomerate mergers. Conglomerate mergers take place to achieve control over distribution channels that otherwise could be used by rival entrants. An entrant with a very differentiated product is accommodated, and an entrant with a close substitute is foreclosed through a conglomerate merger. There also exist equilibria with partial foreclosure where the entrant is forced onto less efficient distribution channels. Incumbent firms' mergers to achieve foreclosure is socially wasteful.

Keywords: MERGERS; BUSINESS ORGANIZATION (search for similar items in EconPapers)
JEL-codes: G34 L12 L40 (search for similar items in EconPapers)
Date: 1999

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Persistent link: http://EconPapers.repec.org/RePEc:fth:bereco:1899

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