Horizontal mergers with Bertrand competition and convex costs

Elpiniki Bakaouka, Marc Escrihuela-Villar and Walter Ferrarese

Mathematical Social Sciences, 2024, vol. 128, issue C, 60-67

Abstract: We discuss horizontal mergers in a homogeneous good industry where firms compete à la Bertrand with increasing marginal production costs. We show that profitable mergers can occur even for lower post-merger prices with respect to the pre-merger scenario, thus implying an increase in consumer surplus. The driving force of the result is the ability of the merged entity cutting production costs by sharing the output among its plants. This output rationalization effect can compensate for the revenue loss due to the merged entity producing less than the cumulated pre-merger production of the merging parties.

Keywords: Bertrand competition; Homogeneous goods; Horizontal mergers (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165489624000192
Full text for ScienceDirect subscribers only

Related works:
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: https://EconPapers.repec.org/RePEc:eee:matsoc:v:128:y:2024:i:c:p:60-67

DOI: 10.1016/j.mathsocsci.2024.01.010

Access Statistics for this article

Mathematical Social Sciences is currently edited by J.-F. Laslier

More articles in Mathematical Social Sciences from Elsevier
Bibliographic data for series maintained by Catherine Liu ().