Endogenous Availability, Cartels, and Merger in an Equilibrium Price Dispersion

Abstract In a generalization of the Butters advertising model, the equilibrium involves one firm that advertises at least twice as much as the others, who all advertise equally. A cartel formation game is considered, and any equilibrium cartel involves at least two, but generally not all, firms. In one equilibrium, only the largest firms join the cartel. A merger game is considered, and, in equilibrium, the large firm buys the other firms in sequence, with discounting equalizing the expected utility of the targets and prices rising over time. Journal of Economic Literature Classification Numbers: D43, D83, L11, L13, L41.