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Horizontal mergers under uniform resource constraints

Pu-yan Nie, Chan Wang and Hong-xing Wen

Journal of Retailing and Consumer Services, 2021, vol. 63, issue C

Abstract: Resource constraints have a vertical influence on a firm's competition and it is important to address the issue of horizontal mergers with scarce resources. This article highlights the effects of uniform resource constraints on horizontal mergers with game theory methods. First, the threshold values for the firms to accept the merger, increasing consumer surplus, and increasing social welfare are presented and compared. Second, the threshold value to merge for consumer surplus maximization is larger than that for profit incentive mergers without resource constraints. Thus, under unbinding resource industries, mergers reduce consumer surplus and it is necessary to implement antitrust. Third, resource constraints deter mergers. Finally, under binding capacity (or resource) constraints, the threshold value for firms to merge is larger than that for the social optimality. Therefore, industries with scare resource should avoid antitrust.

Keywords: Uniform capacity (resource) constraints; Horizontal merger; Consumer surplus; Social welfare (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joreco:v:63:y:2021:i:c:s0969698921002630

DOI: 10.1016/j.jretconser.2021.102697

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