Big Tech mergers: Innovation, competition for the market, and the acquisition of emerging competitors

Michael Katz ()

Information Economics and Policy, 2021, vol. 54, issue C

Abstract: There is broad concern that merger policy toward Big Tech has been too lenient. Big Tech typically operates in markets characterized by innovation-driven “competition for the market.” I show that this fact provides a rationale for heightened scrutiny of incumbents’ acquisitions of emerging or potential competitors. I also address the widespread argument that permissive merger policy promotes innovative entry by facilitating entry for buyout. I show that permissive merger policy can also discourage entrant innovation. One way is by diminishing entrants’ incentives to invest in marginal product improvements when such improvements reduce the gains from merger. A second way is by facilitating incumbency for buyout, under which an incumbent makes investments in order to extract rents from an entrant through merger.

Keywords: Antitrust; Big Tech; Digital markets; Innovation; Merger policy (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:54:y:2021:i:c:s016762452030127x

DOI: 10.1016/j.infoecopol.2020.100883

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