On Merger Profitability and the Intensity of Rivalry

Marc Escrihuela-Villar ()

The B.E. Journal of Economic Analysis & Policy, 2016, vol. 16, issue 2, 1203-1212

Abstract: This note considers a general symmetric quantity-setting oligopoly where the “coefficient of cooperation” defined by Cyert and DeGroot (1973, “An Analysis of Cooperation and Learning in a Duopoly Context”. The American Economic Review 63:24–37) is interpreted as the parameter indicating severity of competition. It is obtained that horizontal mergers are more likely to be profitable in a more competitive market structure. Consequently, the results by Salant et al. (1983, “The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium”. The Quarterly Journal of Economics 98 (2):185–99) about merger profitability are sensitive to the assumption of pre-merger Cournot competition.

Keywords: oligopoly; competitive intensity; horizontal mergers (search for similar items in EconPapers)
JEL-codes: L13 L40 L41 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1515/bejeap-2015-0209

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