The interactions of R&D investments and horizontal mergers

Christos Cabolis, C. Manasakis, Diego Moreno () and Emmanuel Petrakis

Journal of Economic Behavior & Organization, 2021, vol. 187, issue C, 507-534

Abstract: In a homogenous good industry in which firms choose their cost-reducing R&D investments and make merger proposals prior to competing à la Cournot, we identify conditions under which there are coalition-proof Nash equilibria involving horizontal mergers as well as non-integration. Mergers arise whenever the R&D technology is sufficiently effective. Moreover, if firms’ R&D investments are substitutes (complements) and the bargaining power is unevenly (evenly) distributed among merger participants, a merger is the unique coalition-proof Nash equilibrium. Antitrust policy guidelines are simple when the welfare standard is the consumer surplus and R&D investments are substitutes, but are more complex when the standard is total surplus and/or R&D investments are complements.

Keywords: Horizontal mergers; Cost-reducing R&D; Merger Surplus’ distribution; Efficiency gains; Coalition-proof nash equilibrium (search for similar items in EconPapers)
JEL-codes: C72 G34 O31 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:187:y:2021:i:c:p:507-534

DOI: 10.1016/j.jebo.2021.03.037

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