Horizontal mergers in the circular city: a note

Two-firm horizontal Cournot mergers give rise to multi-plant firms in spatial markets. We study location equilibria on the circle for competition between a two-store merged entity and one then two single-store competitors. Several results turn up. First of all, we get equilibrium location patterns that could not have been obtained on the segment. Secondly, we investigate the profitability of such mergers and find that they turn out to be unprofitable much earlier.circular city

Cournot competition in spatial markets : some complementary results on complementarity

We study in this paper location equilibria for a symmetrical two-store duopoly selling complementary varieties, both on the linear and the circular markets. In contrast to the existing literature, besides assuming that each affiliate produces a different complementary variety, we equally consider in turns complementarity among all varieties on the market and substitutability between rival varieties. On the segment market, the intuition of a single-plant entity behaviour is enough to obtain and justify the result of central agglomeration. On the circle, instead, we are able to check the multiple equilibria property, to the extent that besides the intuitiive spatial pattern, we identified each time a second one, involving diametrical dispersion, viable though only for low degrees of complementarity.Complementary products, multi-store competition, spatial Cournot model.

Cournot competition in spatial markets: some complementary results on complementarity

URL des Cahiers : https://halshs.archives-ouvertes.fr/CAHIERS-MSECahiers de la Maison des Sciences Economiques 2005.61 - ISSN : 1624-0340We study in this paper location equilibria for a symmetrical two-store duopoly selling complementary varieties, both on the linear and the circular markets. In contrast to the existing literature, besides assuming that each affiliate produces a different complementary variety, we equally consider in turns complementarity among all varieties on the market and substitutability between rival varieties. On the segment market, the intuition of a single-plant entity behaviour is enough to obtain and justify the result of central agglomeration. On the circle, instead, we are able to check the multiple equilibria property, to the extent that besides the intuitiive spatial pattern, we identified each time a second one, involving diametrical dispersion, viable though only for low degrees of complementarity.Cet article étudie le choix de localisation dans un modèle d'oligopole de Cournot où les firmes produisent des biens complémentaires. Pour la première fois dans la littérature, on fait l'hypothèse que chaque filiale produit des variétés distinctes. On analyse les implications spatiale d'un tel cadre (correspondant par exemple à des firmes produisant des biens-système) en considérant les cas de la complémentarité entre variétés rivales et puis de la substituabilité. L'agglomération totale est toujours un équilibre pour la ville linéaire, ce qui est bien intuitive suivant notre hypothèse de complémentarité intra-firme. Néanmoins, pour la ville circulaire, en plus de l'équilibre intuitif impliquant l'agglomération des propres filiales, on démontre à chaque fois l'existence d'un deuxième équilibre qui exige la dispersion diamétrale des firmes. Ceci montre la robustesse de la multiplicité d'équilibres de localisation dans le cadre circulaire

Negotiating remedies : revealing the merger efficiency gains

This paper aims to contribute to the normative economic analysis of mergers control by taking into account the possible efficiency gains for the design of structural merger remedies. We show that a larger asset transfer should be requested from a less efficient merged firm than from a more efficient one, wich conforms with the recommendations of competition policy practitioners. However, since cost savings are private information of merging firms, the Competition Authority will require them to reveal their efficiency gains, so as to tailor the optimal remedy. We propose a revelation mechanism combining the use of divestitures with the regulation of their sale price. We discuss the opportunity of such a merger policy tool, and argue that in practice it may be used to signal the efficiency gains of notified mergers.Merger control, structural merger remedies, asymmetric information.

Upward Pricing Pressure in Two-Sided Markets: Incorporating Rebalancing Effects

Under embargo until: 2022-12-07In two-sided markets it is important to consider rebalancing effects following a merger, i.e. the impact of a change in margin on one side of the market, either due to a price change or to efficiency gains, on the pricing incentives on the other side. We propose modified versions for the indices of pricing pressure (UPP and GUPPI) that take this into account. We show that in two-sided markets where the cross-group externalities are positive the upward pricing pressure will typically be overstated if the rebalancing effect is ignored. Our approach explains why competition agencies should look at both sides of the market when assessing platform mergers.acceptedVersio

Horizontal mergers on platform markets: cost savings v. cross-group network effects?

We study the impact of cost savings on the outcome of horizontal mergers between two-sided platforms. We consider four symmetrically differentiated platforms located equidistantly on the unit circle and competing in membership fees. Users on both sides single-home, and we allow for both positive and negative cross-group externalities. We find that the impact of merger cost savings on prices is generally not monotonic, and that synergies are necessary for horizontal platform mergers to be Pareto-improving. Furthermore, the merger may benefit users on one side while harming users on the opposite side, which raises some interesting questions for the enforcement of merger control on two-sided markets

Horizontal mergers on platform markets: cost savings v. cross-group network effects?

We study the impact of cost savings on the outcome of horizontal mergers between two-sided platforms. We consider four symmetrically differentiated platforms located equidistantly on the unit circle and competing in membership fees. Users on both sides single-home, and we allow for both positive and negative cross-group externalities. We find that the impact of merger cost savings on prices is generally not monotonic, and that synergies are necessary for horizontal platform mergers to be Pareto-improving. Furthermore, the merger may benefit users on one side while harming users on the opposite side, which raises some interesting questions for the enforcement of merger control on two-sided markets