nep-ind New Economics Papers
on Industrial Organization
Issue of 2006‒03‒05
one paper chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Profitability of Horizontal Mergers in Trigger Strategy Game By Berardino Cesi

  1. By: Berardino Cesi
    Abstract: 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.
    Keywords: Horizontal mergers; Insiders’ dilemma; trigger strategy
    JEL: C73 L13 D43 G34 L41
    Date: 2006–01

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