The limits of monopolization through acquisition

Morton I. Kamien*, Israel Zang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

173 Scopus citations

Abstract

We address the question of whether competitive acquisition of firms by their rivals can result in complete or partial monopolization of a homogeneous product industry. This question is modeled in terms of two distinct three-stage noncoopera-tive games. Analysis of subgame perfect pure strategy Nash equilibria of these games discloses that, under simplifying assumptions, monopolization of an industry through acquisition is limited to industries with relatively few firms. Partial monopolization is either limited in scope or can be completely eliminated by prohibiting any owner from acquiring over 50 percent of the firms in the industry.

Original languageEnglish
Pages (from-to)465-499
Number of pages35
JournalQuarterly Journal of Economics
Volume105
Issue number2
DOIs
StatePublished - May 1990

Funding

FundersFunder number
Israel Institute of Business Research
Tel Aviv University

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