Spatial Competition and Location with Mergers and Product Licensing

George Norman and Lynne Pepall
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George Norman: Department of Economics, Tufts University, MedFord, MA 02155, USA, gnorman@emerald.tufts.edu

Urban Studies, 2000, vol. 37, issue 3, 451-470

Abstract: This paper analyses mergers by Cournot firms producing differentiated products in a spatial market with product licensing by the merged firms. Product licensing allows the merged firms to co-ordinate their locations. If the degree of differentiation is not 'too low', a two-firm merger is more profitable for the merged firms than for the non-merged firms. The locational advantage created by the merger leads to the additional profit from the merger being an increasing function of the number of firms in the market. A two-firm merger generally increases total surplus and is therefore efficiency-enhancing. Moreover, there are circumstances in which every firm in the market wants to find a merger partner, consistent with the wave of mergers characteristic of many markets.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:sae:urbstu:v:37:y:2000:i:3:p:451-470

DOI: 10.1080/0042098002050

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