Regular Article

Spanish Economic Review

, Volume 10, Issue 4, pp 279-288

First online:

Mergers in asymmetric Stackelberg markets

  • Marc Escrihuela-VillarAffiliated withEscuela de Economía, Universidad de Guanajuato Email author 
  • , Ramon Faulí-OllerAffiliated withEconomics Department, Universidad de Alicante

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Abstract

It is well known that the profitability of horizontal mergers with quantity competition is scarce. However, in an asymmetric Stackelberg market we obtain that some mergers are profitable. Our main result is that mergers among followers become profitable when the followers are inefficient enough. In this case, leaders reduce their output when followers merge and this reduction renders the merger profitable. This merger increases price and welfare is reduced.

Keywords

Mergers Asymmetries Stackelberg

JEL Classification

L13 L40 L41