Competition in Successive Markets: Entry and Mergers

Jean J. Gabszewicz, Skerdilajda Zanaj
2006 Social Science Research Network  
This paper analyses successive markets where the intra-market linkage depends on the technology used to produce the final output. We investigate entry of new firms, when entry obtains by expanding the economy, as well as collusive agreements between firms. We highlight the differentiated effects of entry corresponding to a constant or decreasing returns technology. In particular, we show that, under decreasing returns, free entry in both markets does not entail the usual tendency for the input
more » ... ency for the input price to adjust to its marginal cost while it does under constant returns. Then, we analyse collusive agreements by stressing the role of upstream linkage on the profitability of horizontal mergersà la Salant, Switzer and Reynolds.
doi:10.2139/ssrn.961361 fatcat:b6unz6qjo5follbrzgs2v7lsk4