Horizontal Mergers and Product Quality

Kurt Brekke () and Luigi Siciliani
Authors registered in the RePEc Author Service: Odd Rune Straume

No 10156, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using a spatial competition framework with three ex ante identical firms, we study the effects of a horizontal merger on quality, price and welfare. The merging firms always reduce quality. They also increase prices if demand responsiveness to quality is sufficiently low. The non-merging firm, on the other hand, always responds by increasing both quality and prices. Overall, a merger leads to higher average prices and quality in the market. The welfare implications of a merger are not clear-cut. If the demand responsiveness to quality is sufficiently high, some consumers benefit from the merger and social welfare might also increase.

Keywords: Horizontal mergers; Quality; Spatial competition (search for similar items in EconPapers)
JEL-codes: L13 L15 L41 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://cepr.org/publications/DP10156 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Horizontal mergers and product quality (2017)
Journal Article: Horizontal mergers and product quality (2017)
Working Paper: Horizontal Mergers and Product Quality (2015)
Working Paper: Horizontal Mergers and Product Quality- (2014)
Working Paper: Horizontal Mergers and Product Quality (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:10156

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10156

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().