Thursday, December 1, 2022

Horizontal Mergers between Asymmetric Cournot Oligopolists

Horizontal Mergers between Asymmetric Cournot Oligopolists

Xiao Fu

Fudan University - School of Management

Ping Lin

Shandong University

Juan Lu

Guangdong University of Finance

Abstract

We analyze the profitability of horizontal mergers in Cournot markets, where firms are divided into two groups based on the extent to which their products are differentiated. We show that both within-group and cross-group mergers are more likely to occur when either products are more distant substitutes or the number of merger outsiders decreases. Moreover, the relative size of each group is a crucial factor that determines which type of merger is more profitable than the other. Therefore, our findings highlight the importance of taking outsiders’ free riding into account when assessing the profitability of mergers.

https://lawprofessors.typepad.com/antitrustprof_blog/2022/12/horizontal-mergers-between-asymmetric-cournot-oligopolists.html

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