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Profitability of horizontal mergers in trigger strategy game

By Berardino Cesi

Abstract

It is shown that, in a dynamic competition, an exogenous horizontal\ud merger is pro table even if a small share of active rms merge. However,\ud each rm has incentive to remain outside the merger because it would ben-\ud e t more (Insiders dilemma). We show that in an in nite repeated game\ud in which the rms use trigger strategies an exogenous bilateral merger can\ud be pro table and the Insiders dilemma is mitigated

Topics: Horizontal mergers, Insiders dilemma, trigger strategy
Publisher: Dept. of Economics, University of Leicester
Year: 2006
OAI identifier: oai:lra.le.ac.uk:2381/7435

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