Asset Salvageability and the Potential for Trade Restraint through Merger

Richard Dowell

RAND Journal of Economics, 1984, vol. 15, issue 4, 537-545

Abstract: This article evaluates impact of asset salvageability on the profitability of restraint of trade through industrial combination. In the case of merger either for monopoly or market dominance, a postmerger price equal to the premerger, competitive price is proved a reasonable possibility. Even in a declining industry, where noncompetitive pricing is unlikely to attract new firms, raising prices after merger may prove suboptimal. In cases where a postmerger price increase is optimal, asset salvageability is shown to have a restraining effect on the magnitude of the increase.

Date: 1984
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