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Title: |
Effects of Horizontal Merger on Price,
Profits, and Market Power in a Dominant-Firm Oligopoly |
| Author: |
Mallela,
Parthasaradhi; Nahata, Babu |
| Author
Affiliation: |
N Ill U; U
Louisville |
| Source: |
International Economic Journal, Spring 1989, v. 3, no. 1, pp. 55-62 |
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Publication Date: |
Spring 1989 |
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Abstract: |
Assuming that all firms have rising
marginal costs, merger between a dominant firm and one of the firms in
the competitive fringe is considered. The effects on market price and
output, profits and market power are shown when the dominant firm
operates as a two-plant firm after merger and output arises from both
plants. It is proved that if merger offers no efficiency gain, then
market price always rises; and if merger results in efficiency gain,
then market price falls if and only if there are sufficiently large
number of firms in the fringe. In any case, there is profit incentive
for merger to take place. |
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