Endogenous Mergers in Concentrated Markets

CEPR Discussion Paper Series No. 1544

Posted: 19 Mar 1997

See all articles by Lars Persson

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Date Written: December 1996

Abstract

The merger literature almost exclusively considers mergers between exogenously specified firms. This paper proposes an approach to predict the pattern of mergers in situations where different mergers are feasible. It generalizes the traditional industrial organization approach, employing ideas on coalition-formation from cooperative game theory. The model suggests that in concentrated markets, equilibrium mergers are conducive to market structures with large industry profits, thus pointing to an inherent conflict between private and socially-correct merger incentives. While applying the model, light is also thrown on formation of research joint ventures, mergers between quantity-constrained firms, and tariff-jumping foreign direct investment.

JEL Classification: G34, C71, L22

Suggested Citation

Persson, Lars, Endogenous Mergers in Concentrated Markets (December 1996). CEPR Discussion Paper Series No. 1544, Available at SSRN: https://ssrn.com/abstract=4750

Lars Persson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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