Abstract
In this note we model two merger cases where the strategic position of a follower firm changes after a merger: 1) one follower and one leader merge into one new leader; and 2) two followers merge into one new leader. Our model indicates that these two leader-generating bilateral mergers are always profitable in the post-merger market. A free-riding issue exists in the first case, but not in the second case. The impacts on consumer surplus also vary with these two cases of mergers.
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