On merger in a collusive Stackelberg market

Marc Escrihuela-Villar ()

Economics Bulletin, 2013, vol. 33, issue 3, 2394-2401

Abstract: This note shows that the profitability of a merger between a leader and a follower in a Stackelberg market crucially depends on the degree of collusion among leaders. When leaders cut production in order to raise the price, followers have lower incentives to merge with the leaders since by standing alone they can free ride on the output-reducing effort of the cartel formed by the leaders. As a consequence, one might expect that followers will only be absorbed by leaders if the competition among leaders is sufficiently intense.

Keywords: Degree of collusion; Stackelberg; Mergers (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2013-09-17
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Citations: View citations in EconPapers (1)

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