Acquisitions versus Entry: The Evolution of Concentration

Zava Aydemir and Armin Schmutzler

No 208, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: We consider market dynamics in a reduced form model. In the simplest version, there are two investors and several small noninvesting firms. In each period, one investor can acquire a small firm, the other investor decides about market entry. After that all firms play an oligopoly game. We derive conditions under which increasing market concentration arises with myopic firms, we show that a model with forward-looking firms and with arbitrary numbers of investors yield similar results. We apply the framework to a Cournot model with cost synergies and a Bertrand model where acquisitions extend the product spectrum of a firm.

Keywords: acquisitions; entry; concentration; synergies; product variety. (search for similar items in EconPapers)
JEL-codes: D43 L11 L12 L13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-08, Revised 2002-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Economic Behavior and Organization, 2008, 65(1), 133-146

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https://www.zora.uzh.ch/id/eprint/52166/1/wp0208.pdf Revised version, 2002 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:soz:wpaper:0208

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