Mergers of retailers with limited selling capacity

Ramón Faulí-Oller ()
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Ramón Faulí-Oller: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We consider two (symmetric) upstream firms producing independent goods that sell to consumers through symmetric retailers. The distinguishing feature of retailers is that they have a selling capacity, in the sense, that there is an upper limit in the total units of the two goods they can sell. For low enough capacity levels, we obtain that wholesale prices are increasing in the capacity and therefore we find cases where profits of retailers increase by restricting capacity. Keeping constant the industry selling capacity, we study the profitability of the merger of all retailers. For low capacity levels we obtain that wholesale prices increase with the merger and therefore the merger of retailers is not profitable.

Keywords: retailing; mergers; selling capacity (search for similar items in EconPapers)
JEL-codes: L13 L41 L42 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2009-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2009-26

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