Conglomerate Mergers and Entry in Innovative Industries

Federico Etro ()

No 2018:19, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: I study a merger between producers of complement inputs facing entry of superior inputs, with investment by the incumbents in deterministic cost reduction and by the entrants in probabilistic innovation, and competition in prices. The merger is profitable by solving Cournot complementarity problems in investment and pricing, and has positive (negative) effects on R&D by the incumbents (entrants). With inelastic demand the merger harms consumers if the incumbents are efficient enough even without bundling, and always when a commitment to bundling is adopted. Instead, with a demand elastic enough, the merger increases consumer surplus even when a commitment to pure bundling is feasible.

Keywords: Mergers; R&D; Cournot complementarity; bundling; antitrust in high-tech industries (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018
New Economics Papers: this item is included in nep-com and nep-ino
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2018:19

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