Economics at your fingertips  


Zhiqi Chen () and Gang Li

Economic Inquiry, 2018, vol. 56, issue 2, 1346-1356

Abstract: We examine a merger between two competitors in a Bertrand‐Edgeworth model. We find that the effects of merger depend on the tightness of capacity constraints. The combination of two firms has no price effect if and only if the capacity constraints of all firms are binding both before and after the merger. However, a merger may turn a binding capacity constraint into a slack one, which results in higher prices. In an industry where excess capacity drives the premerger prices of all firms to the marginal cost, a merger may cause prices to rise even though aggregate capacity remains constant. (JEL L13, L40)

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: Horizontal Mergers in the Presence of Capacity Constraints (2014) Downloads
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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0095-2583

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2019-02-23
Handle: RePEc:bla:ecinqu:v:56:y:2018:i:2:p:1346-1356