Profitability of Horizontal Mergers in Trigger Strategy Game

It is shown that, in a dynamic competition, an exogenous horizontal merger is profitable even if a small share of active firms merge. However, each firm has incentive to remain outside the merger because it would benefit more (Insiders’dilemma). We show that in an infinite repeated game in which the firms use trigger strategies an exogenous bilateral merger can be profitable and the Insiders’dilemma is mitigated.

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Year of publication:	2006-01
Authors:	Cesi, Berardino
Institutions:	Department of Economics, Leicester University
Subject:	Horizontal mergers \| Insiders’ dilemma \| trigger strategy

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Extent:	application/pdf
Series:	Discussion Papers in Economics.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 06/4
Classification:	C73 - Stochastic and Dynamic Games ; L13 - Oligopoly and Other Imperfect Markets ; D43 - Oligopoly and Other Forms of Market Imperfection ; G34 - Mergers; Acquisitions; Restructuring; Corporate Governance ; L41 - Monopolization; Horizontal Anticompetitive Practices
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005561939