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Communication dans un congrès Année : 2008

Asset Divestitures and Horizontal Mergers: An N-Firm Cournot Story

Résumé

This paper aims to analyze the effectiveness of asset transfers in preventing unilateral effects of a merger. By generalizing market size and the number of merging firms while maintaining quantity competition from previous literature, we show that asset divestitures still allow the remedying of certain price increases. Market size negatively impacts the optimal share to divest. On the other hand, the divestiture share increases with the number of merging firms. In spite of the required asset sale, parties' profitability will remain ensured in most cases. Buyers always make profit from their purchase if industry fixed costs are rather low. We also add the alternative of a second buyer and compare outcomes with both consumer and welfare standards. Furthermore, as many mergers lead to efficiency gains, we'll integrate specific cost synergies and show that the higher synergies, the smaller the divestiture share. Lastly, we show that setting up a business from just the divested assets (carve-out) is bound to fail if firms' technology remain the same.
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Dates et versions

halshs-00466348, version 1 (23-03-2010)

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  • HAL Id : halshs-00466348 , version 1

Citer

Patrice Bougette. Asset Divestitures and Horizontal Mergers: An N-Firm Cournot Story. Association of Southern European Economic Theorists (ASSET), Nov 2008, Florence, Italy. ⟨halshs-00466348⟩
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