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POST‐MERGER PRODUCT REPOSITIONING *
Author(s) -
GANDHI AMIT,
FROEB LUKE,
TSCHANTZ STEVEN,
WERDEN GREGORY J.
Publication year - 2008
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2008.00332.x
Subject(s) - cannibalization , computation , incentive , product (mathematics) , order (exchange) , industrial organization , selection (genetic algorithm) , business , microeconomics , computer science , economics , mathematics , finance , algorithm , geometry , artificial intelligence
This paper analyzes the effects of mergers between firms competing by simultaneously choosing price and location. Products combined by a merger are repositioned away from each other to reduce cannibalization, and non‐merging substitutes are, in response, repositioned between the merged products. This repositioning greatly reduces the merged firm's incentive to raise prices and thus substantially mitigates the anticompetitive effects of the merger. Computation of, and selection among, equilibria is done with a novel technique known as the stochastic response dynamic , which does not require the computation of first‐order conditions.