Horizontal merger of differentiated firms with product consolidation: the effect of change in substitutability

Nobuo Matsubayashi () and Tatsuya Hashimoto ()
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Nobuo Matsubayashi: Keio University
Tatsuya Hashimoto: Keio University

Economics Bulletin, 2010, vol. 30, issue 1, 94-102

Abstract: This paper studies an effect of a horizontal merger where a product consolidation by the merged firm may alter the substitutability in the industry. We show that as the number of firms in the industry increases, this type of merger becomes profitable for merging firms, while unprofitable for non-merging firms. Furthermore, we show that with a moderate level of change in the substitutability, the merger of a larger number of firms with a product consolidation is not necessarily profitable for merging firms.

Keywords: Horizontal merger; Cournot oligopoly; Brand synergy effect (search for similar items in EconPapers)
JEL-codes: L1 L2 (search for similar items in EconPapers)
Date: 2010-01-11
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