Cooperative Merger and Joint Maximization Under Sequential Entry

Lancaster University Management School Working Paper No. 2003/016

24 Pages Posted: 18 Aug 2003

See all articles by R. Rothschild

R. Rothschild

Lancaster University - Department of Economics

John S. Heywood

University of Wisconsin at Milwaukee

Kristen A. Monaco

California State University, Long Beach - Department of Economics

Abstract

This paper explores the concept of cooperative merger between two of three entrants that arrive sequentially in a spatial market and practise discriminatory pricing. In this framework, in contrast to much of the theoretical literature, the so-called 'merger paradox' can be comprehensively overturned.We compare our results with those arising when one firm strategically locates two plants. Although this second problem is superficially similar to the first, the underlying behavior and implications differ in crucial respects. The welfare consequences of all of our results are demonstrated.

Keywords: Spatial price discrimination, sequential entry, cooperative merger, merger paradox, multi-plant location

JEL Classification: D43, L41

Suggested Citation

Rothschild, R. and Heywood, John S. and Monaco, Kristen A., Cooperative Merger and Joint Maximization Under Sequential Entry. Lancaster University Management School Working Paper No. 2003/016, Available at SSRN: https://ssrn.com/abstract=417300 or http://dx.doi.org/10.2139/ssrn.417300

R. Rothschild (Contact Author)

Lancaster University - Department of Economics ( email )

Bailrigg
Lancaster LA1 4YX
United Kingdom
+441524594217 (Phone)
+441524594244 (Fax)

John S. Heywood

University of Wisconsin at Milwaukee ( email )

3210 N. Maryland Avenue, Bolton Hall 802
Bolton Hall 802
Milwaukee, WI 53211
United States
414-229-4437 (Phone)
414-229-3860 (Fax)

Kristen A. Monaco

California State University, Long Beach - Department of Economics ( email )

1250 Bellflower Blvd
Long Beach, CA 90840-4607
United States
(562) 985-5076 (Phone)

HOME PAGE: http://www.csulb.edu/~kmonaco

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