Abstract
Abstract. We study the profitability of horizontal mergers in a dynamic competition context with sticky prices. It is shown that, when firms use open‐loop strategies, a merger is profitable only if the share of the market that merges is significant enough. In the case where firms use closed‐loop strategies we provide a method to conduct analytically the study of the profitability of horizontal mergers. We first prove the existence of an equilibrium of the game when a subset of firms merges. When firms use feedback strategies, mergers are profitable even when the share of the market that merges is arbitrarily small. JEL Classification:D4, L13
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