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  Entry Deterrence by Non-Horizontal Merger
Robert Innes
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  Abstract
 
We study when and how pure non-horizontal mergers, whether cross-product or vertical, can deter new entry. Organizational mergers implicitly commit firms to more aggressive price competition. Because heightened competition deters entry, mergers can occur in equilibrium even when, absent entry considerations, they do not. We show that, in order to prevent a flood of entrants, mergers arise even when a marginal merger costs incumbent firms more than does a marginal entrant.

 

 
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2011 Dept. of Agricultural & Resource Economics, The University of Arizona
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Last updated November 9, 2004
Document located at http://ag.arizona.edu/arec/pubs/researchpapers/abstract2004-09.html