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Merger under Spatial Competition

Author

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  • R. Rothschild

    (Department of Economics, Lancaster University, Lancaster, LA1 4YX, UK, R.Rothschild@lancaster.ac.uk)

Abstract

This paper studies the relationship between merger activity and choice of location under conditions of spatial price discrimination. We consider an industry containing three firms, of which two make up the merged entity and the third remains an 'outsider'. In this type of model, the location choices of the parties to a merger reflect their individual shares in post-merger profits. We show in particular that: the presence of the outside firm has an important role to play in the determination of the equilibrium set of locations within the market; the overall as well as the individual (per-firm) profitability of merger depends upon the firms' relative shares in the gains from this activity; the profitability of the outside firm may be either increased or decreased by the merger; the profitability of entry into the industry depends upon the ownership structure of the existing firms.

Suggested Citation

  • R. Rothschild, 2000. "Merger under Spatial Competition," Urban Studies, Urban Studies Journal Limited, vol. 37(3), pages 443-449, March.
    • Handle: RePEc:sae:urbstu:v:37:y:2000:i:3:p:443-449
    DOI: 10.1080/0042098002041
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    References listed on IDEAS

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    1. McAfee, R Preston & Simons, Joseph J & Williams, Michael A, 1992. "Horizontal Mergers in Spatially Differentiated Noncooperative Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 349-358, December.
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    4. Levy, David T & Reitzes, James D, 1992. "Anticompetitive Effects of Mergers in Markets with Localized Competition," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 427-440, April.
    5. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
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    Cited by:

    1. Emilie Dargaud & Carlo Reggiani, 2015. "On The Price Effects Of Horizontal Mergers: A Theoretical Interpretation," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 236-255, July.
    2. James Gaisford & Stefan Lutz, 2007. "A Multi-Product Framework Generating Waves of Mergers and Divestitures," ICER Working Papers 36-2007, ICER - International Centre for Economic Research.
    3. Emilie Dargaud & Carlo Reggiani, "undated". "Horizontal Mergers in the Spokes Model," Discussion Papers 09/12, Department of Economics, University of York.
    4. Brito, Duarte, 2005. "Should alternative mergers or acquisitions be considered by antitrust authorities?," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 129-153, February.

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