Entry Deterrence by Non-Horizontal Merger
نویسنده
چکیده
We study when and how pure non-horizontal mergers, whether cross-product or vertical, can deter new entry. Organizational mergers implicitly commit firms to more aggressive price competition. Because heightened competition deters entry, mergers can occur in equilibrium even when, absent entry considerations, they do not. We show that, in order to prevent a flood of entrants, mergers arise even when a marginal merger costs incumbent firms more than does a marginal entrant. *Departments of Economics and Agricultural and Resource Economics, University of Arizona, Tucson, AZ 85721. email: [email protected].
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