To Merge or Not to Merge:
Multimarket Supply Chain Network Oligopolies, Coalitions,
and the Merger Paradox

Abstract: In this paper, we model oligopolistic firms with supply chain networks who are involved in the competitive production, storage, and distribution of a homogeneous product to multiple demand markets. We formulate the governing Nash-Cournot equilibrium conditions as a variational inequality problem and identify several special cases of the model, notably, a spatial oligopoly and the classical oligopoly problem. We then formulate mergers resulting from various coalitions, including the merger of all firms, which yields a monopoly.
The proposed computational approach, which is based on projected dynamical systems, fully exploits the network structure of the problems and yields closed form solutions at each iteration. We compute solutions to a spectrum of numerical supply chain network oligopoly examples, both prior to and post specific mergers. We compare the total costs, the total revenues, as well as the profits obtained for the concrete numerical examples in order to gain insights into the merger paradox.
This paper makes a contribution to game theoretic modeling of competitive supply chain network problems in an oligopolistic setting as well as to the formulation, solution, and numerical evaluation of associated horizontal mergers.

Biography: Anna Nagurney is the John F. Smith Memorial Professor in the Department of Finance and Operations Management in the Isenberg School of Management at the University of Massachusetts at Amherst.  She is the first female to be appointed to a named Professorship in the University of Massachusetts system. She is  the Founding Director of the Virtual Center for Supernetworks and the Supernetworks Laboratory for Computation and Visualization at UMass Amherst. She received her AB, ScB, ScM, and PhD degrees from Brown University in Providence, Rhode Island. She devotes her career to education and research that combines operations research/management science, economics, and engineering. Her focus is the applied and theoretical aspects of decision-making on network systems, particularly in the areas of transportation and logistics, energy and the environment, and  economics and finance. Her most recent book is Supply Chain Network Economics: Dynamics of Prices, Flows, and Profits published in July 2006. She  has authored or co-authored 8 other books including Supernetworks: Decision-Making for the Information Age, Financial Networks, Sustainable Transportation Networks, and Network Economics, edited the book, Innovations in Financial and Economic Networks, and authored or co-authored more than 125 refereed journal articles.

Anna Nagurney