Center for Economic Research, Department of Economics, University of Minnesota
In order to talk about merger, one needs some
notion of assets or capital which can be combined, and one
must allow for asymmetry in the equilibrium to reflect such.
Using a simple notion of capital with linear marginal cost
and linear demand, we show in two types of models when there
is and when there is not an incentive to merge. Merger
results in an increase in the equilibrium price to the
benefit of all firms. However, this price increase arises
primarily because the output of the merged firm is lower
after the merger than the combined output of its partners
prior to merger. We show how the profitability of merger
depends upon both the structural and behavioral parameters
of the model.
Perry, M.K. and Porter, R.H., (1983), "Oligopoly and the Incentive for Horizontal Merger", Discussion Paper No. 190, Center for Economic Research, Department of Economics, University of Minnesota.
Perry, Martin K.; Porter, Robert H..
Oligopoly and the Incentive for Horizontal Merger.
Center for Economic Research, Department of Economics, University of Minnesota.
Retrieved from the University of Minnesota Digital Conservancy,
Content distributed via the University of Minnesota's Digital Conservancy may be subject to additional license and use restrictions applied by the depositor.