Mergers, investments and demand expansion
Marc Bourreau () and
Bruno Jullien ()
Economics Letters, 2018, vol. 167, issue C, 136-141
In this paper, we study the impact of a merger to monopoly on prices and investments. Two single-product firms compete in prices and coverage for a new technology. In equilibrium, one firm covers a larger territory than its competitor with the new technology, leading to single-product and multi-product zones, and sets a higher uniform price. If the firms merge, the merged entity can set different prices and coverage for the two products. We find that the merger raises prices and total coverage, but reduces the coverage of the multi-product zone. We also show that the merger can increase total welfare and consumer welfare.
Keywords: Horizontal mergers; Investments; Competition (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 (search for similar items in EconPapers)
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