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Huck, Steffen; Konrad, Kai A.; Müller, Wieland (2001): Big fish eat small fish. On merger in Stackelberg markets. In: Economics Letters, Vol. 73, No. 2: pp. 213-217
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In this note we show that the profitability of merger in markets with quantity competition does not only depend on cost conditions but also on the market structure and on the involved firms' 'strategic power.' Our main result is that bilateral merger can be profitable even if costs are linear - but only in the case of a 'strong' firm incorporating a 'weak' firm which has adverse effects on welfare. © Elsevier Science B.V.