Bilateral merger in a leadership structure

Tarun Kabiraj () and Arijit Mukherjee

No 2001/04, Keele Department of Economics Discussion Papers (1995-2001) from Department of Economics, Keele University

Abstract: In an oligopoly industry of k firms (k > 2) with linear demand and identical (constant) average cost of production, a bilateral merger is never profitable when all firms choose their quantities simultaneously. In this paper we reexamine the issue when some firms have first-mover advantage. We find that in a leader-follower structure a bilateral merger is always profitable when a leader and a follower merge together and the merged firm behaves like a leader. But, a bilateral merger between leaders or between followers may not be privately profitable.

Keywords: Follower; Leader; Merger (search for similar items in EconPapers)
JEL-codes: L13 (search for similar items in EconPapers)
Date: 2001-02
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Published in Journal of Quantitative Economics, New Series, 1 (Old Series, (2001) 17): 82 - 88 (2003).

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