Sequential Mergers and Delayed Monopolization in Triopoly

Didier Laussel
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Didier Laussel: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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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 (search for similar items in EconPapers)
Date: 2023
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Published in Dynamic Games and Applications, inPress, ⟨10.1007/s13235-023-00526-7⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04239546

DOI: 10.1007/s13235-023-00526-7

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