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Mergers with Supply Functions
The Journal of Industrial Economics
Vol. 52, No. 4 (Dec., 2004), pp. 535-546
Published by: Wiley
Stable URL: http://www.jstor.org/stable/3569862
Page Count: 12
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I analyze the equilibrium effects of a merger in an industry when firms compete by submitting supply functions. Under the assumptions that the industry capital stock is fixed and production costs are quadratic and decreasing in capital, I find that any merger results in all firms reducing supply. The decrease in supply by non-participating firms makes any merger profitable. A merger from a symmetric industry lowers welfare.
The Journal of Industrial Economics © 2004 Wiley