Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159701
Authors: 
Lambertini, Luca
Palestini, Arsen
Year of Publication: 
2013
Series/Report no.: 
Quaderni - Working Paper DSE 862
Abstract: 
We characterise the subgame perfect equilibrium of a differential market game with hyperbolic inverse demand where firms are quantity-setters and accumulate capacity over time à la Ramsey. The related Hamilton-Jacobi-Bellman are solved in closed form both on infinite and on finite horizon setups and the optimal strategies are determined. Then, we analyse the feasibility of horizontal mergers in both static and dynamic settings, and find appropriate conditions for their profitability under both circumstances. Static profitability of a merger implies dynamic profitability of the same merger. It appears that such a demand structure makes mergers more likely to occur than they would on the basis of the standard linear inverse demand.
JEL: 
C73
L13
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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