Horizontal mergers of price-setting firms with sunk capacity costs

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Abstract

We examine the profitability of a horizontal merger and its effects on the outsiders' profits and industry prices, in a market for a homogeneous product where firms with sunk capacity costs engage in price competition. We show that, unlike previous studies, a merger can hurt the outsiders, the postmerger prices can be lower than thepremerger prices, and a merger can reduce the joint profits of the participating firms even in a static model of price competition. © 1995.

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APA

Baik, K. H. (1995). Horizontal mergers of price-setting firms with sunk capacity costs. Quarterly Review of Economics and Finance, 35(3), 245–256. https://doi.org/10.1016/1062-9769(95)90067-5

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