Spatial Competition and Merger

Higgins Richard S (), Johnson Paul A () and Sullivan John T ()
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Higgins Richard S: LECG, LLC
Johnson Paul A: LECG, LLC
Sullivan John T: LECG, LLC

The B.E. Journal of Economic Analysis & Policy, 2004, vol. 4, issue 1, 1-37

Abstract: We consider a computational equilibrium model of spatially differentiated Bertrand competition and apply it to merger analysis. Two pricing paradigms are studied: one where firms cannot price discriminate among customers and one where firms can. The model encompasses many details that make it highly realistic. A detailed example illustrates several insights into merger analysis that are not readily apparent through traditional means. The most important of these is that merger of substitute products under Bertrand price competition need not result in a price increase.

Date: 2004
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DOI: 10.2202/1538-0653.1223

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