The Profitability of Small Horizontal Mergers with Nonlinear Demand Functions

Quaderni DSE Working Paper No. 728

15 Pages Posted: 9 Mar 2011  

Hamideh Esfahani

affiliation not provided to SSRN

Luca Lambertini

University of Bologna - Department of Economics

Date Written: January 2011

Abstract

We want to take a differential game approach with price dynamics to conduct an investigation into the consequences of horizontal merger of firms where the demand function is nonlinear. We take into consideration the open-loop equilibrium. We show that in relation to the fact that the demand is nonlinear and prices follow some stickiness an incentive for small merger exists, while it does not appear under the standard approach using a linear demand function.

Keywords: Horizontal mergers, Differential game, Sticky price, Nonlinear demand

JEL Classification: C73, D43, G34, L13

Suggested Citation

Esfahani, Hamideh and Lambertini, Luca, The Profitability of Small Horizontal Mergers with Nonlinear Demand Functions (January 2011). Quaderni DSE Working Paper No. 728. Available at SSRN: https://ssrn.com/abstract=1780987 or http://dx.doi.org/10.2139/ssrn.1780987

Hamideh Esfahani (Contact Author)

affiliation not provided to SSRN ( email )

Luca Lambertini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 2092600 (Phone)
+39 051 2092664 (Fax)

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