Document details

Merger, partial collusion and relocation

Author(s): Posada, Pedro cv logo 1 ; Straume, Odd Rune cv logo 2

Date: 2004

Persistent ID: http://hdl.handle.net/1822/6849

Origin: RepositóriUM - Universidade do Minho

Subject(s): Spatial competition; Merger; Relocation; Partial collusion


Description
We set up a three-firm model of spatial competition to analyse how a merger affects the incentives for relocation, and conversely, how the possibility of relocation affects the profitability of the merger, particularly for the non-participating firm. We also consider the cases of partial collusion in either prices or locations. Under the assumption of mill pricing, we find that a merger will generally induce the merger participants to relocate, but the direction of relocation is ambiguous, and dependent on the degree of convexity in the consumers transportation cost function. Furthermore, we identify a set of parameter values for which the free-rider effect of a merger vanishes, implying that the possibility of relocation could solve the merger paradox.
Document Type Article
Language English
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