TY - UNPB
T1 - Monopolization Through Acquisitions in Multimarket Oligopolies (Replaced by TILEC DP 2011-047)
AU - Ray Chaudhuri, A.
N1 - Pagination: 28
PY - 2010
Y1 - 2010
N2 - This paper shows that, under Cournot competition, monopolization through acquisitions is more likely to occur in industries where firms serve multiple segmented markets rather than a single integrated market, given that cost functions are strictly convex. Under segmented markets, within a two-country model, the paper shows that if a multinational firm acquires a local firm in one of the markets, the product price in that market rises but the product price in the other falls. This decreases the profit that each local firm would obtain if it unilaterally remained outside a merger to monopoly, making it cheaper to acquire. This reverses the well established result in the existing merger literature, which focuses on the case where an industry serves a single integrated market. Moreover, the paper shows that the sum of consumer surplus across the countries may rise in response to an acquisition despite the absence of any synergies, which existing literature shows is not possible in a single integrated market.
AB - This paper shows that, under Cournot competition, monopolization through acquisitions is more likely to occur in industries where firms serve multiple segmented markets rather than a single integrated market, given that cost functions are strictly convex. Under segmented markets, within a two-country model, the paper shows that if a multinational firm acquires a local firm in one of the markets, the product price in that market rises but the product price in the other falls. This decreases the profit that each local firm would obtain if it unilaterally remained outside a merger to monopoly, making it cheaper to acquire. This reverses the well established result in the existing merger literature, which focuses on the case where an industry serves a single integrated market. Moreover, the paper shows that the sum of consumer surplus across the countries may rise in response to an acquisition despite the absence of any synergies, which existing literature shows is not possible in a single integrated market.
KW - monopolization
KW - horizontal mergers
KW - competition policy
KW - Cournot competition
KW - economic integration
M3 - Discussion paper
VL - 2010-035
T3 - TILEC Discussion Paper
BT - Monopolization Through Acquisitions in Multimarket Oligopolies (Replaced by TILEC DP 2011-047)
PB - TILEC
CY - Tilburg
ER -