Friday, June 10, 2011
Posted by D. Daniel Sokol
Hamideh Esfahani (University of Bologna) addresses Profitability of Horizontal Mergers in the Presence of Price Stickiness.
ABSTRACT: In this paper, we investigate the profitability of horizontal mergers of firms with price adjustments. We take a di¤erential game approach and both the open-loop as well as the closed-loop equlibria are considered. We show that the merger incentive is determined by how fast the price adapts to the equilibrium level.