A note on mergers and relocation

Posada and Straume (J Econ 83:243–265, <CitationRef CitationID="CR5">2004</CitationRef>) analyze a three-firm model of a circular city where two of the firms merge and may choose to relocate. They propose an equilibrium with relocation where taking part in the merger yields higher profits than staying outside, i.e., relocation may solve the so-called merger paradox. In this note, it is shown that the equilibrium candidate considered is not an equilibrium. Copyright Springer-Verlag 2012