Leading and merging:convex costs, Stackelberg and the merger paradox

Heywood, John and Mcginty, Matthew (2008) Leading and merging:convex costs, Stackelberg and the merger paradox. Southern Economic Journal, 74 (3). pp. 879-893. ISSN 0038-4038

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Abstract

This paper examines the consequences of a Stackelberg leader merging with followers when costs are convex. Such mergers are always profitable for the participants, and the followers often do better merging than remaining excluded rivals. This resolution of the merger paradox cannot be generated either by Stackelberg leadership without convex costs or by convex costs without leadership. In addition, with convex costs, a merger with the leader can actually harm excluded rivals (suggesting why they might object to the merger) and increase social welfare.

Item Type:
Journal Article
Journal or Publication Title:
Southern Economic Journal
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
64926
Deposited By:
Deposited On:
10 Jun 2013 19:00
Refereed?:
Yes
Published?:
Published
Last Modified:
09 Sep 2020 01:52