Horizontal Mergers in the Spokes Model

Abstract

The theoretical analysis of merger poses a number of paradoxes. If firms compete in prices, a merger is profitable for all parties involved. Outsiders, however, free-ride and earn higher profits than insiders. The "spokes model" is a recently introduced framework to study n-firms spatial competition. This paper shows that in this model free-riding does not necessarily take place.horizontal mergers, spokes model, mergers paradoxes.