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Multi-Firm Mergers with Leaders and Followers

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  • Gamal Atallah

    (Department of Economics, University of Ottawa, Ottawa, ON)

Abstract

This paper analyzes mergers involving several leaders and followers in Stackelberg models, with the merged entity acting as a leader. Adding a follower to a merger increases its profitability or reduces its losses. A merger between one leader and any number of followers is always profitable. When a merger involves two leaders, it requires a sufficiently large proportion of followers to participate in it to be profitable. A merger is less likely to be profitable when the number of participating leaders is intermediate and the number of participating followers is small. All mergers involving leaders and followers are welfare reducing. Overall, Stackelberg leadership partially alleviates the merger paradox.

Suggested Citation

  • Gamal Atallah, 2015. "Multi-Firm Mergers with Leaders and Followers," Working Papers E1501E, University of Ottawa, Department of Economics.
    • Handle: RePEc:ott:wpaper:e1501e
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    References listed on IDEAS

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    Cited by:

    1. Manel Antelo & David Peón, 2019. "On Cooperation Through Alliances and Mergers," Journal of Industry, Competition and Trade, Springer, vol. 19(2), pages 263-279, June.
    2. Walter Ferrarese, 2020. "When Multiple Merged Entities Lead in Stackelberg Oligopolies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(1), pages 131-142, February.
    3. Walter Ferrarese, 2021. "Merger Waves Through Market Leadership," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(3), pages 371-385, November.
    4. Walter Ferrarese, 2017. "Endogenous Mergers and Leadership Acquisition in Cournot Oligopolies," CEIS Research Paper 398, Tor Vergata University, CEIS, revised 06 Dec 2017.

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    More about this item

    Keywords

    Fusions; Profitabilité des fusions; Paradoxe des fusions; Stackelberg; Meneurs; Suiveurs;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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