Cournot Oligopoly Conditions Under Which Any Horizontal Merger is Profitable

David Hennessy

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Findings in economic theory suggest that horizontal mergers involving firms with aggregate market share less than 50% are unlikely to be motivated by the consequent reduction in competitivity. The results arise because, absent cost efficiencies, quantity-setting firms in small mergers are impoverished by the merger. We demonstrate that this conclusion is a consequence of the strong restrictions imposed on the demand function, and we identify a well-behaved demand function such that any set of merging firms benefits from the reduction in competition even when there are no cost efficiencies.

Date: 2000-11-01
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Published in Review of Industrial Organization, November 2000, vol. 17, pp. 277-284

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Journal Article: Cournot Oligopoly Conditions under which Any Horizontal Merger Is Profitable (2000)
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