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The effect of horizontal mergers, when firms compete in prices and investments

Massimo Motta and Emanuele Tarantino

No 17-01, Working Papers from University of Mannheim, Department of Economics

Abstract: It has been suggested that mergers, by increasing concentration, raise incentives to invest and hence are pro-competitive. To study the effects of mergers, we rewrite a game with simultaneous price and cost-reducing investment choices as one where firms only choose prices, and make use of aggregative game theory. We find no support for that claim: absent effciency gains, the merger lowers total investments and consumer surplus.Only if it entails suffcient effciency gains, will it be pro-competitive. We also show there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments.

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-law, nep-mic and nep-mkt
Date: 2017
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Citations: View citations in EconPapers (5) Track citations by RSS feed

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https://madoc.bib.uni-mannheim.de/42805/1/17-01_Motta%2C%20Tarantino.pdf

Related works:
Working Paper: The Effect of Horizontal Mergers, When Firms compete in Prices and Investments (2018) 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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