An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly

Volker Nocke and Nicolas Schutz

No 12905, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the oligopoly distortions to consumer surplus and aggregate surplus, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.

Keywords: Multiproduct firms; Aggregative game; Oligopoly pricing; market power; Horizontal merger; Herfindahl index (search for similar items in EconPapers)
JEL-codes: L13 L40 (search for similar items in EconPapers)
Date: 2018-05
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Related works:
Working Paper: An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly (2018)
Working Paper: An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly (2018)
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