Merger Policy for Platforms: A Growth Theory Perspective

Jane Olmstead-Rumsey, Federico Puglisi and Liangjie Wu

No 20156, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Should Big Tech firms be banned from acquiring other firms? We address this question by developing a growth model with platform-based consumption. The platform supplies some products in the economy, and startups supply the rest, with the platform intermediating consumption of goods in the digital sector. Acquisitions increase the platform's product offerings and have competing effects on the entry of new startups. Theoretically, an acquisition ban reduces growth in the short run but may increase it in the long run. Calibrating the model to data on U.S. households' time use on digital platforms suggests a small welfare loss from an acquisition ban due to slower growth in both the short and long run.

Keywords: Digital platforms; Endogenous growth; Mergers and acquisitions; Conglomerate mergers; Big tech; Startups (search for similar items in EconPapers)
JEL-codes: E20 L40 O41 (search for similar items in EconPapers)
Date: 2025-04
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