 Dynamic merger policy and pre-merger product choice by an entrantRichard Gilbert and Michael Katz () International Journal of Industrial Organization, 2022, vol. 81, issue C Abstract: We examine the effects of merger and merger policy on a potential entrant's pre-merger product choice. We establish conditions under which the possibility of merger can induce an entrant to imitate an incumbent's product instead of innovating with a more differentiated product. Turning to policy, current practice is to evaluate a proposed merger by focusing on post-merger effects (e.g., whether the merged firm will charge higher prices or invest less in innovation than would the two firms if they remained independent of one another). We show that policies focused solely on a proposed merger's ex post welfare effects can induce an entrant to choose an inefficient direction for its pre-merger investment decisions. We also show that, taking into account merger policy's effects on pre-merger product choice, it can be optimal to approve mergers with a positive probability even when the post-merger welfare effects of every consummated merger are negative. Keywords: Antitrust; Innovation; Merger Policy; Product Differentiation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:81:y:2022:i:c:s0167718721001041 DOI: 10.1016/j.ijindorg.2021.102812 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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