2006-03-05 papers

on Industrial Organization

Issue of 2006‒03‒05
one paper chosen by

Profitability of Horizontal Mergers in Trigger Strategy Game By Berardino Cesi

Profitability of Horizontal Mergers in Trigger Strategy Game

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
URL:	http://d.repec.org/n?u=RePEc:lec:leecon:06/4&r=ind

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