Working Paper No. 513

Endogenous Mergers in Concentrated Markets

Published: July 15, 1998Pages: 43Keywords: Endogenous mergers, Coalition formationJEL-codes: L13, L41

Endogenous Mergers in Concentrated Markets Henrik Horn and Lars Persson


This paper proposes an approach for prediction the pattern of mergers when different mergers are feasible. It generalizes the traditional IO approach, employing ideas on coalition-formation from cooperative gave theory. The model suggests that in concentrated markets, mergers are conductive to market structures with large industry profits, and thus points to a conflict between private and social incentives. It is shown how mergers may be undertaken in order to preempt other possible, and socially more desirable, mergers. The model also throws light on the formation of research joint ventures and tariff-jumping foreign direct investment.

Henrik Horn

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Ph: +46 8 665 4540
henrik.horn@ifn.se

Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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