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Multiproduct mergers and quality competition

Justin P. Johnson and Andrew Rhodes ()

RAND Journal of Economics, 2021, vol. 52, issue 3, 633-661

Abstract: We investigate mergers in markets where quality differences between products are central and firms may reposition their product lines by adding or removing products of different qualities following a merger. Such mergers are materially different from those studied in the existing literature. Mergers without synergies may exhibit a product‐mix effect which raises consumer surplus, but only when the pre‐merger industry structure satisfies certain observable features. Post‐merger synergies may lower consumer surplus. The level of, and changes in, the Herfindahl–Hirschman Index may give a misleading assessment of how a merger affects consumers. A merger may benefit some outsiders but harm others.

Date: 2021
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Working Paper: Multiproduct Mergers and Quality Competition (2021) Downloads
Working Paper: Multiproduct mergers and quality competition (2021)
Working Paper: Multiproduct Mergers and Quality Competition (2021) Downloads
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