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Marc Escrihuela-Villar
''On merger in a collusive Stackelberg market''
( 2013, Vol. 33 No.3 )
This note shows that the profitability of a merger between a leader and a follower in a Stackelberg market crucially depends on the degree of collusion among leaders. When leaders cut production in order to raise the price, followers have lower incentives to merge with the leaders since by standing alone they can free ride on the output-reducing effort of the cartel formed by the leaders. As a consequence, one might expect that followers will only be absorbed by leaders if the competition among leaders is sufficiently intense.
Keywords: Degree of collusion; Stackelberg; Mergers
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L4 - Antitrust Issues and Policies: General
Manuscript Received : May 15 2013 Manuscript Accepted : Sep 17 2013

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