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| Andreea Cosnita |
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| ''Merger, spin-off and divestiture: insights from a spatial model'' |
| ( 2006, Vol. 4 No.9 ) |
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| Mergers and spin-offs are typically opposite strategies for firms, and are not simultaneously profitable in a standard linear Cournot model. We propose a simple spatial Cournot framework, where merger is profitable but subsequent divisionalization is even more. However, this is true only for partial spin-off, not for total divisionalization, due to the opportunity for specific efficiency gains in a spatial setting. Finally, the resulting market structure is analyzed in terms of a post-merger divestiture required by the merger control authority. We show here the divestiture can be profitable for firms even if the merger was not, while still fulfilling its corrective role. |
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| Keywords: divestiture |
JEL: D4 - Market Structure and Pricing: General
L1 - Market Structure, Firm Strategy, and Market Performance: General |
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| Manuscript Received : Feb 08 2006 | | Manuscript Accepted : Feb 08 2006 |
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