Horizontal Mergers under Bertrand Competition

X. Wang () and Jingang Zhao

No 2108, Working Papers from Department of Economics, University of Missouri

Abstract: This paper draws on recent results from the study of hybrid games and multi-product oligopolies to analyze horizontal mergers under Bertrand competition. We identify a set of linear Bertrand models in which a horizontal merger will reduce both the outsiders' profits and consumer surplus when the insiders' cost savings are sufficiently large. We also show that mergers in Bertrand models will normally increase the insiders' profits even without generating any cost-savings. Such results suggest that the increase in the insiders' profits may arise at the expense of rival firms and consumers, and thus raise new concerns about the anti-competitive effects of mergers under price competition.

Keywords: Horizontal merger; Bertrand competition; consumer surplus (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-cwa, nep-gth, nep-ind, nep-mic and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:2108

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