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Acquisitions versus Entry: The Evolution of ConcentrationZava AydemirUniversity of Zurich - Socioeconomic Institute - Department of Economics Armin SchmutzlerDepartment of Economics; Centre for Economic Policy Research (CEPR) August 2002 University of Zurich Socioeconomic Institute Working Paper No. 0208 Abstract: We consider market dynamics in a reduced form model. In the simplest version, there are two investors and several small non-investing firms. In each period, one investor can acquire a small firm, the other investor decides about market entry. After that all firms play an oligopoly game. We derive conditions under which increasing market concentration arises with myopic firms, we show that a model with forward-looking firms and with arbitrary numbers of investors yield similar results. We apply the framework to a Cournot model with cost synergies and a Bertrand model where acquisitions extend the product spectrum of a firm.
Number of Pages in PDF File: 38 Keywords: Acquisitions, Entry, Concentration, Synergies, Product Variety JEL Classification: D43, L11, L12, L13 working papers seriesDate posted: November 18, 2002Suggested CitationContact Information
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