Sequential Mergers and Delayed Monopolization in Triopoly

Didier Laussel ()
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Didier Laussel: Aix-Marseille Univ.

Dynamic Games and Applications, 2024, vol. 14, issue 1, No 11, 223-252

Abstract: Abstract Under triopoly and Cournot competition, we study an infinite horizon Markov perfect equilibrium merger game in which in each period one of the firms (“the Buyer”) selects a bid price and then the two sellers accept or reject this offer with some probability. The possibility of a “war of attrition” equilibrium in which the seller who outlasts the other is then able to sell in the following period at a greater price, is a distinct feature of the model. Delayed monopolization is all the more likely when the discount factor is small and the ratio duopoly/ triopoly profits is important. Two other equilibria are shown to be possible: an unmerged and an immediate monopolization equilibrium. Each equilibrium is shown to correspond to a different set of parameter values. The two special cases of linear and constant price elastic demand functions are fully characterized.

Keywords: Horizontal mergers; War of attrition; Monopolization; Markov-perfect equilibrium; C73; D43; L12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13235-023-00526-7

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