Munich Personal RePEc Archive

Monopolization through acquisition

Prokop, Jacek (2005): Monopolization through acquisition. Published in: The National Economy No. Special Issue (2006): pp. 163-176.

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This paper considers the possibility of monopolizing a three-firm industry through acquisition of rivals in the absence of the restrictions imposed by the antitrust authorities. The analysis is conducted in two models: a static and a dynamic model of monopolization by a single buyer. In contrast to preceding models, a firm owner is allowed to use mixed strategies in order to decide whether to sell his firm or not. The static model implies that the monopolization through acquisition can be profitable. However, the dynamic formulation of the problem suggests that the expected profits are much smaller, and may not be sufficient to cover any fixed costs associated with the acquisition process. Moreover, the probability of selling the firm by its owner is almost zero, which makes the whole monopolization process extremely unlikely.

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