Title: Monopolisation of triopoly – revisited

Authors: Jacek Prokop

Addresses: Department of Economics II, Warsaw School of Economics, Al. Niepodleglosci 162, 02-554 Warsaw, Poland

Abstract: The main objective of this paper is to provide a new insight into the possibility of monopolising a three-firm industry through acquisition of rivals in the absence of restrictions imposed by the antitrust authorities. The dynamic model of monopolisation under Cournot-type rivalry among oligopolists implies that the monopolisation through acquisition is not profitable because of the free riding among the owners of firms. However, in a model of triopoly where the acquirer could become the market leader of the Stackelberg type, we show that a single buyer can monopolise an industry through acquisition of rivals. It means that the monopolisation of triopoly may not be prevented by the market alone. This finding has an important regulatory implication different from the results of the previous models: an active intervention of antitrust authorities in the market with only three firms is necessary to block mergers and acquisitions.

Keywords: triopoly monopolisation; mergers; acquisitions; free riding; antitrust policy; computational economics; dynamic modelling; rivalry; regulations.

DOI: 10.1504/IJCEE.2009.029254

International Journal of Computational Economics and Econometrics, 2009 Vol.1 No.2, pp.113 - 125

Available online: 17 Nov 2009 *

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