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Sequential Mergers and Delayed Monopolization in Triopoly

Author

Listed:
  • Didier Laussel

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Under triopoly and Cournot competition, we study an infinite horizon Markov perfect equilibrium merger game in which in each period one of the firms ("the Buyer") selects a bid price and then the two sellers accept or reject this offer with some probability. The possibility of a "war of attrition" equilibrium in which the seller who outlasts the other is then able to sell in the following period at a greater price, is a distinct feature of the model. Delayed monopolization is all the more likely when the discount factor is small and the ratio duopoly/ triopoly profits is important. Two other equilibria are shown to be possible: an unmerged and an immediate monopolization equilibrium. Each equilibrium is shown to correspond to a different set of parameter values. The two special cases of linear and constant price elastic demand functions are fully characterized.

Suggested Citation

  • Didier Laussel, 2023. "Sequential Mergers and Delayed Monopolization in Triopoly," Post-Print hal-04239546, HAL.
    • Handle: RePEc:hal:journl:hal-04239546
    DOI: 10.1007/s13235-023-00526-7
    as

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