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The Effect of Horizontal Mergers, When Firms compete in Prices and Investments

Massimo Motta () and Emanuele Tarantino

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We study the effects of mergers when firms offer differentiated products and compete in prices and investments. Since it is in principle ambiguous, we use aggregative game theory to sign the net effect of the merger: We find that only if it entailed sufficient efficiency gains, could the merger raise total investments and consumer surplus. We also prove there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments. Finally, we show that, from the consumer welfare point of view, a R&D cooperative agreement is superior to any consumer-welfare reducing merger.

Keywords: horizontal mergers; innovation; investments; research joint ventures; competition (search for similar items in EconPapers)
JEL-codes: K22 D43 L13 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-law and nep-mic
Date: 2018-11
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Related works:
Working Paper: The Effect of Horizontal Mergers, when Firms Compete in Prices and Investments (2017) Downloads
Working Paper: The effect of horizontal mergers, when firms compete in prices and investments (2017) Downloads
Working Paper: The effect of horizontal mergers, when firms compete in prices and investments (2017) Downloads
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