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Mergers and Investments in New Products

Bruno Jullien () and Yassine Lefouili

No 18-949, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We investigate the impact of a horizontal merger between two competitors on their incentives to develop new products. We show that a merger raises the incentives to innovate if and only if the merged entity's incremental gain from a second innovation is larger than the individual profit of an innovator when both firms innovate in the no-merger scenario. Applying this result to the Hotelling model, we find that a merger spurs innovation and can be beneficial to consumers if the degree of product differentiation is positive but not too high.

Keywords: Merger Policy; Product Innovation; R&D Investments (search for similar items in EconPapers)
JEL-codes: K21 L13 L40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-law and nep-mic
Date: 2018-08
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