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Endogenous Mergers and Cost Heterogeneity

[journal article]

Granier, Laurent

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Abstract The objective of this paper is to analyze the effect of firms' heterogeneity on their incentives to merge. To reach this target, merger decisions are modelled as endogenous. To simplify the analysis, we focus on the extreme case where merger leads to monopolization. Kamien and Zang (1990 and 1993) give monopolization conditions in static and dynamic acquisition games. Introducing cost heterogeneity in a n-firm industry, we provide more general monopolization conditions. Indeed, we show that any industry can be monopolized if cost heterogeneity is large enough. This result provides new informations to competition authorities on concentration possibilities and allows them to focus particularly on some industries.
Publication Year 2008
Page/Pages p. 1865-1871
Journal Applied Economics, 40 (2008) 14
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)