Mergers in stackelberg markets with efficiency gains

Mariana Cunha; Hélder Vasconcelos

doi:10.1007/s10842-014-0182-4

Mergers in stackelberg markets with efficiency gains

Mariana Cunha, Hélder Vasconcelos

Research output: Contribution to journal › Article › peer-review

11 Citations (Scopus)

Abstract

This paper analyzes the profitability of mergers and their induced welfare effects in a setting where: (i) firms compete`a la Stackelberg; and (ii) mergers may give rise to efficiency gains. The results contrast with the ones obtained by previous literature where merger’s induced efficiency gains are assumed away. In particular, we find that under certain conditions regarding the cost benefits resulting from mergers, the so called “free-riding problem” is eliminated and mergers are not only profitable but also welfare enhancing, even with linear costs.

Original language	English
Pages (from-to)	105-134
Number of pages	30
Journal	Journal of Industry, Competition and Trade
Volume	15
Issue number	2
DOIs	https://doi.org/10.1007/s10842-014-0182-4
Publication status	Published - 1 Jun 2015
Externally published	Yes

Keywords

Efficiency gains
Mergers
Stackelberg

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10.1007/s10842-014-0182-4

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title = "Mergers in stackelberg markets with efficiency gains",

abstract = "This paper analyzes the profitability of mergers and their induced welfare effects in a setting where: (i) firms compete`a la Stackelberg; and (ii) mergers may give rise to efficiency gains. The results contrast with the ones obtained by previous literature where merger{\textquoteright}s induced efficiency gains are assumed away. In particular, we find that under certain conditions regarding the cost benefits resulting from mergers, the so called “free-riding problem” is eliminated and mergers are not only profitable but also welfare enhancing, even with linear costs.",

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author = "Mariana Cunha and H{\'e}lder Vasconcelos",

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AU - Vasconcelos, Hélder

N1 - Funding Information: The author Mariana Cunha acknowledges Fundação para a Ciência e Tecnologia for financial support (FCTDFRH – SFRH / BD / 70000 / 2010). Publisher Copyright: © 2014, Springer Science+Business Media New York.

PY - 2015/6/1

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N2 - This paper analyzes the profitability of mergers and their induced welfare effects in a setting where: (i) firms compete`a la Stackelberg; and (ii) mergers may give rise to efficiency gains. The results contrast with the ones obtained by previous literature where merger’s induced efficiency gains are assumed away. In particular, we find that under certain conditions regarding the cost benefits resulting from mergers, the so called “free-riding problem” is eliminated and mergers are not only profitable but also welfare enhancing, even with linear costs.

AB - This paper analyzes the profitability of mergers and their induced welfare effects in a setting where: (i) firms compete`a la Stackelberg; and (ii) mergers may give rise to efficiency gains. The results contrast with the ones obtained by previous literature where merger’s induced efficiency gains are assumed away. In particular, we find that under certain conditions regarding the cost benefits resulting from mergers, the so called “free-riding problem” is eliminated and mergers are not only profitable but also welfare enhancing, even with linear costs.

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ER -

Mergers in stackelberg markets with efficiency gains

Abstract

Keywords

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