Arbeitspapier
Consumer Search Costs and the Incentives to merge under Bertrand Competition
This paper studies the incentives to merge in a Bertrand competitionmodel where firms sell differentiated products and consumers search the marketfor satisfactory deals. In the pre-merger market equilibrium, all firms lookalike and so the probability a firm is next in the queue consumers follow whenvisiting firms is equal across non-visited firms. However, after a merger,insiders raise their prices more than the outsiders so consumers search forgood deals first at the non-merging stores and then, if they do not find anyproduct satisfactory enough, they continue searching at the merging stores.When search cost are negligible, the results of Deneckere and Davidson (1985)hold. However, as search costs increase, the merging firms receive fewercustomers so mergers become unprofitable for sufficiently large search costs.This new merger paradox is more likely the higher the number of non-mergingfirms.
- Language
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Englisch
- Bibliographic citation
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Series: Tinbergen Institute Discussion Paper ; No. 11-099/1
- Classification
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Wirtschaft
Market Structure, Pricing, and Design: General
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Oligopoly and Other Imperfect Markets
- Subject
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mergers
search
insiders
outsiders
order of search
prominence
- Event
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Geistige Schöpfung
- (who)
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Moraga-Gonzalez, Jose Luis
Petrikaite, Vaiva
- Event
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Veröffentlichung
- (who)
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Tinbergen Institute
- (where)
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Amsterdam and Rotterdam
- (when)
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2011
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Moraga-Gonzalez, Jose Luis
- Petrikaite, Vaiva
- Tinbergen Institute
Time of origin
- 2011
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