Huck, Steffen; Konrad, Kai A.; Müller, Wieland
Merger and collusion in contests.
In: Journal of Institutional and Theoretical Economics, Vol. 158, No. 4: pp. 563-575
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Competition in some product markets takes the form of a contest. If some firms cooperate in such markets, they must decide how to allocate effort on each of their products and whether to reduce the number of their products in the competition. We show how this decision depends on the convexity properties of the contest success function, and we characterize conditions under which cooperation is profitable.