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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Zulehner, Christine / Schirle, Tammy


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5-year IMPACT FACTOR: 0.825

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Impact per Publication (IPP) 2015: 0.455

Online
ISSN
1935-1682
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Small Fish Become Big Fish: Mergers in Stackelberg Markets Revisited

Duarte Brito1 / Margarida Catalão-Lopes2

1Universidade Nova de Lisboa and CEFAGE-UE,

2CEG-IST, Technical University of Lisbon,

Citation Information: The B.E. Journal of Economic Analysis & Policy. Volume 11, Issue 1, ISSN (Online) 1935-1682, DOI: 10.2202/1935-1682.2817, May 2011

Publication History

Published Online:
2011-05-02

Abstract

This paper analyzes, under convex costs, the price effects of mergers involving two Stackelberg followers that together become a leader and revisits the “merger paradox” and the insiders' dilemma. Contrary to what might be expected, prices are more likely to increase with cost convexity than with linear costs. Also, the incentive to free-ride may reappear.

Keywords: mergers; Stackelberg; convex costs

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