Potential merger-forcing entry reduces maximum spacing between firms in spatial competition

摘要: In the literature, range of market sizes (spacings between firms) consistent with free-entry equilibrium, in various models spatial competition, extends from zero-profit size, up to size for which ‘sophisticated entry’ halfway two existing firms, by an entrant that correctly foresees post-entry prices, is marginally deterred. I argue upper limit might be (significantly smaller) ‘merger-forcing right next firm, causing severe price competition and inducing a horizontal merger