Mergers and investments in new products

Anna D’annunzio, Bruno Jullien (), Yassine Lefouili and Leonardo Madio
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Anna D’annunzio: University of Rome - Tor Vergata, Department of Economics and Finance, , Via Columbia 2
Bruno Jullien: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Yassine Lefouili: TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Leonardo Madio: Department of Economics and Management, University of Padua

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Abstract: This paper examines how horizontal mergers affect firms' incentives to invest in R&D leading to the development of new products. We characterize the impact of a merger to monopoly and a 3-to-2 merger on equilibrium innovation efforts and consumer surplus, absent efficiency gains and spillovers. We show that a 3-to-2 merger directly alters the outsider's innovation incentives by shifting its best-response function upward, and we analyze how this mechanism affects merger outcomes for innovation and consumer surplus. Finally, we examine how efficiency gains and remedies modify post-merger innovation efforts.

Date: 2026-05
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Published in International Journal of Industrial Organization, 2026, pp.103291. ⟨10.1016/j.ijindorg.2026.103291⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05686558

DOI: 10.1016/j.ijindorg.2026.103291

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