Strategic Contracts versus Multiple Plants: Location under Sequential Entry

21 Pages Posted: 8 Feb 2007

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

In this paper we explore the concept of a 'strategic contract' between two of three entrants that arrive sequentially in a spatial market and practise discriminatory pricing. We compare our results with those arising when two firms merge to create two plants. Although this second problem is superficially similar to the first, the underlying behavior and implications differ in crucial respects. The consequences, in terms of a variety of measures of welfare, of all of our results are demonstrated. We also consider the implications of the results for the so-called 'merger paradox'.

Suggested Citation

Rothschild, R. and Heywood, John S. and Monaco, Kristen A., Strategic Contracts versus Multiple Plants: Location under Sequential Entry. Manchester School, Vol. 75, No. 2, pp. 237-257, March 2007, Available at SSRN: https://ssrn.com/abstract=961955 or http://dx.doi.org/10.1111/j.1467-9957.2007.01013.x

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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