Abstract
The SSR (1983, QJE) paper shows that in an oligopoly industry of kfirms (k > 2) with linear demand and identical (constant) average cost of production, a bilateral merger is never profitable when all firms choose their quantities simultaneously. In this paper we re-examine the issue when some firms have first-mover advantage. We find that in a leader-follower structure a bilateral merger is always profitable when a leader and a follower merge together and the merged firm behaves like a leader. But, a bilateral merger between leaders or between followers may not be privately profitable.
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Kabiraj, T., Mukherjee, A. Bilateral Merger a Note on Salant-Switzer-Reynolds Model. J. Quant. Econ. 1, 82–88 (2003). https://doi.org/10.1007/BF03404650
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DOI: https://doi.org/10.1007/BF03404650