A Theory of Conglomerate Mergers

Zhijun Chen and Patrick Rey ()
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Patrick Rey: 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

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Abstract: We present a theory of conglomerate mergers and explore the effect of portfolio differentiation due to the heterogeneity of consumption synergy derived from product bundling. The differentiation of product portfolios reduces competition and leads to higher prices for stand- alone products in highly concentrated markets. As a result, conglomerate mergers benefit consumers who purchase bundled products from the merged entity but can harm those who prefer to mix-and-match standalone products. We demonstrate that a conglomerate merger increases total consumer surplus if the merged firm continues to sell standalone products, but it can be detrimental to consumers if the firm commits to pure bundling. Our analysis provides important policy implications for assessing conglomerate merger cases.

Keywords: Conglomerate mergers; Portfolio differentiation; Bundling (search for similar items in EconPapers)
Date: 2026-02-02
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