Small Fish Become Big Fish: Mergers in Stackelberg Markets Revisited

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Abstract

This paper analyzes, under convex costs, the price effects of mergers involving two Stackelberg followers that together become a leader and revisits the "merger paradox" and the insiders' dilemma. Contrary to what might be expected, prices are more likely to increase with cost convexity than with linear costs. Also, the incentive to free-ride may reappear.
Original languageUnknown
Pages (from-to)art 24
JournalThe B.E. Journal of Economic Analysis & Policy
Volume11
Issue number1
DOIs
Publication statusPublished - 1 Jan 2011

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