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Stable market structures from merger activities in mixed oligopoly with asymmetric costs

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Abstract

This paper examines endogenous merger formations in a mixed oligopoly. Applying the core as a solution concept, we analyze which market structure(s) remain(s) stable when three firms—two symmetric private firms and one inefficient public firm—are allowed to merge with each other in a mixed Cournot industry. We show that according to the value of the marginal cost of the public firm, there always exists a pair of share ratios of the owners of both the (pre-merged) public firm and the (pre-merged) private firm such that the market structure with the merger between the public firm and one private firm belongs to the core. When the initial market structure is a mixed triopoly, it can only be blocked when one public firm and one private firm merge. Furthermore, we conduct a similar analysis in a general mixed oligopoly with one public firm and n private firms.

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Authors and Affiliations

  1. Faculty of Political Science and Economics, Waseda University, 1-6-1, Nishiwaseda, Shunjuku-ku, Tokyo, 169-8050, Japan

    Yoshio Kamijo

  2. Graduate School of Economics, Waseda University, 1-6-1, Nishiwaseda, Shunjuku-ku, Tokyo, 169-8050, Japan

    Yasuhiko Nakamura

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  1. Yoshio Kamijo
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  2. Yasuhiko Nakamura
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Correspondence to Yasuhiko Nakamura.

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Kamijo, Y., Nakamura, Y. Stable market structures from merger activities in mixed oligopoly with asymmetric costs. J Econ 98, 1–24 (2009). https://doi.org/10.1007/s00712-009-0074-y

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  • DOI: https://doi.org/10.1007/s00712-009-0074-y

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