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Small scale entry versus acquisitions of small firms: is concentration self-reinforcing?


Aydemir, Zava; Schmutzler, Armin (2008). Small scale entry versus acquisitions of small firms: is concentration self-reinforcing? Journal of Economic Behavior & Organization, 65(1):133-146.

Abstract

We consider a reduced form model with acquisitions and entry. There are two investors and several small non-investing firms. 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 apply the framework to a Cournot model with cost synergies and a Bertrand model where acquisitions extend the product spectrum of a firm.

Abstract

We consider a reduced form model with acquisitions and entry. There are two investors and several small non-investing firms. 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 apply the framework to a Cournot model with cost synergies and a Bertrand model where acquisitions extend the product spectrum of a firm.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:28 January 2008
Deposited On:11 Feb 2008 12:21
Last Modified:05 Apr 2016 12:17
Publisher:Elsevier
ISSN:0167-2681
Publisher DOI:https://doi.org/10.1016/j.jebo.2004.11.017

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