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| Author: | Huck, S. (et al.) |
| Title: | The merger paradox and why aspiration levels let it fail in the laboratory |
| Journal: | Economic Journal
2007 : JUL, VOL. 117:522, p. 1073-1095 |
| Index terms: | bargaining input-output analysis mergers market entry production |
| Freeterms: | merger paradox |
| Language: | eng |
| Abstract: | Based on an experiment, the merger paradox, a relative of Harsanyi's bargaining paradox, is explored by analysing bilateral mergers in experimental Cournot markets with initially three or four firms. Total outputs are predicted well by standard Cournot-Nash equilibrium, but merged firms end up producing more than their competitors. The findings are explained by a notion of aspiration levels, and it is demonstrated that the same logic applies also to a new firm market entry. |
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