The Effect of Horizontal Mergers, when Firms Compete in Prices and Investments

Emanuele Tarantino and Massimo Motta ()

No 987, Working Papers from Barcelona School of Economics

Abstract: It has been suggested that mergers, by increasing concentration, raise incentives to invest and hence are pro-competitive. To study the effects of mergers, we rewrite a game with simultaneous price and cost-reducing investment choices as one where firms only choose prices, and make use of aggregative game theory. We find no support for that claim: absent efficiency gains, the merger lowers total investments and consumer surplus. Only if it entails sufficient efficiency gains, will it be pro-competitive. We also show there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments.

Keywords: investments; competition; horizontal mergers; innovation; network-sharing agreements (search for similar items in EconPapers)
JEL-codes: D43 K22 L13 L41 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
https://bw.bse.eu/wp-content/uploads/2017/09/987-file.pdf (application/pdf)

Related works:
Journal Article: The effect of horizontal mergers, when firms compete in prices and investments (2021)
Working Paper: The Effect of Horizontal Mergers, When Firms compete in Prices and Investments (2018)
Working Paper: The effect of horizontal mergers, when firms compete in prices and investments (2017)
Working Paper: The effect of horizontal mergers, when firms compete in prices and investments (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:987

Access Statistics for this paper

More papers in Working Papers from Barcelona School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Bruno Guallar ().