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Whom should I merge with? How product substitutability affects merger profitability

Roberto Cellini ()
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Roberto Cellini: University of Catania

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2021, vol. 48, issue 3, No 2, 337-353

Abstract: Abstract The paper presents a simple model of oligopoly, in which three firms produce differentiated goods. The degree of product substitutability is not uniform across goods. Merger profitability from the firms’ perspective is investigated. The model shows that the merger profitability depends on the degree of good differentiation. Contrary to what seems to emerge from different models, merger between firms that supply “more similar” product is more profitable as compared to merger between firms supplying more differentiated goods.

Keywords: Oligopoly; Merger; Profitability; Merger paradox (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40812-020-00180-9

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Economia e Politica Industriale: Journal of Industrial and Business Economics is currently edited by C. Cambini, M.G. Colombo, L. Piscitello, L. Rondi and A. Zanfei

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