Profitability of horizontal mergers in trigger strategy game
reportposted on 27.01.2010, 16:46 by Berardino Cesi
It is shown that, in a dynamic competition, an exogenous horizontal merger is pro table even if a small share of active rms merge. However, each rm has incentive to remain outside the merger because it would ben- e t more (Insiders dilemma). We show that in an in nite repeated game in which the rms use trigger strategies an exogenous bilateral merger can be pro table and the Insiders dilemma is mitigated.