Author

Juan LU

Date of Award

8-21-2013

Degree Type

Thesis

Degree Name

Master of Philosophy (MPHIL)

Department

Economics

First Advisor

Prof. Ping LIN

Second Advisor

Dr. Liangliang JIANG

Abstract

Building an asymmetric differentiated goods quantity competition model, the present paper explores how substitutability of products, one of the factors affecting the unilateral effect, determines horizontal mergers and acquisitions equilibrium and strategies. It seems intuitively obvious that the merger between firms with goods that are sufficiently close substitutes can be more profitable. However, this thesis's counter-intuitive results show that, for some parameter values, a merger is more profitable for the merging firm when the target firm produces a distant substitutes (i.e., when it is not the closest competitor to the acquiring firm in the market).The theoretical analysis shows that to merge with firm with low substitute parameter is more profitable provided that target firms are close enough and the both of them are distant enough from merging firms. The results in Cournot model and Bertrand have some similarities, for example, they both harm to consumer surplus and the optimal strategy harms most. For the difference, for example, in Coumot model, whenever it is profitable to merge with a distant competitor, it is the optimal strategy, while in Bertrand model, it depends. The paper also extends the classical "horizontal merger paradox" to a setting of asymmetric differentiated oligopoly.

Keywords

asymmetric oligopoly, horizontal merger, merger paradox

Recommended Citation

Lu, J. (2013). Equilibrium and strategies of horizontal mergers inasymmetric differentiated oligopoly (Master's thesis). Retrieved from http://dx.doi.org/10.14793/econ_etd.26

Included in

Economics Commons

Share

COinS