Merger, Partial Collusion and Relocation

Pedro Posada () and Odd Rune Straume

Journal of Economics, 2004, vol. 83, issue 3, 243-265

Abstract: We set up a three-firm model of spatial competition to analyse how a merger affects the incentives for relocation, and conversely, how the possibility of relocation affects the profitability of the merger, particularly for the non-participating firm. We also consider the cases of partial collusion in either prices or locations. Under the assumption of mill pricing, we find that a merger will generally induce the merger participants to relocate, but the direction of relocation is ambiguous, and dependent on the degree of convexity in the consumers’ transportation cost function. Furthermore, we identify a set of parameter values for which the free-rider effect of a merger vanishes, implying that the possibility of relocation could solve the “merger paradox”. Copyright Springer-Verlag Wien 2004

Keywords: spatial competition; merger; relocation; partial collusion; L13; L41; R30 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (18)

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Working Paper: Merger, partial collusion and relocation (2003)
Working Paper: Merger, partial collusion and relocation (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:83:y:2004:i:3:p:243-265

DOI: 10.1007/s00712-004-0091-9

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