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Market Efficiency and Coalition Structures

Bartolini, David (2007) Market Efficiency and Coalition Structures. Working Paper. University of Essex, Department of Economics, Economics Discussion Papers, Colchester.

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Abstract

We consider a three-stage game in which symmetric firms decide whether to invest in a cost-reducing technology, then they have the possibility to merge (forming coalitions), and eventually, in the third stage, a Cournot oligopoly game is played by the resulting firms (coalitions). We show that, contrary to the existing literature, the monopoly market structure may fail to form even when the number of initial firms is just three. We then introduce a weighted sharing rule and show that a situation in which all firms acquire the cost-reducing asset cannot be sustained as a Subgame Perfect Equilibrium.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: investment, coalition formation, oligopoly market structure
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jenny Connolly
Date Deposited: 28 Aug 2014 11:39
Last Modified: 28 Aug 2014 11:39
URI: http://repository.essex.ac.uk/id/eprint/8910

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