Merger effect of two firms under network equilibrium

Nobuo Matsubayashi, Masashi Umezawa, Yasushi Masuda, Hisakazu Nishino

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper studies the merger effect of two firms under the price competition of n firms, represented by n nodes on a linear network equilibrium model. The difference of profits between pre- and post-merger of the two firms can be described explicitly in terms of the substitution matrix. In general, the evaluation of the merger effect requires the knowledge of the substitution effects among all n nodes. For some interesting special cases, however, we obtain simple qualitative results. Specifically, the profitability of the merger can be predicted from the substitution effect of the two firms. Numerical examples exhibit the usefulness of our results.

Original languageEnglish
Pages (from-to)434-447
Number of pages14
JournalEuropean Journal of Operational Research
Volume137
Issue number2
DOIs
Publication statusPublished - 2002 Mar 1

Keywords

  • Bertrand price competition
  • Merger effect
  • Pricing
  • Wardrop equilibrium

ASJC Scopus subject areas

  • Computer Science(all)
  • Modelling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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