The effect of horizontal mergers, when firms compete in prices and investments
Massimo Motta () and
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Massimo Motta: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3418679
Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
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 efficiency gains, the merger lowers total investments and consumer surplus. Only if it entails sufficient efficiency 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.
Keywords: Horizontal mergers; innovation; investments; network-sharing agreements; competition. (search for similar items in EconPapers)
JEL-codes: K22 D43 L13 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino, nep-law, nep-mic and nep-mkt
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Working Paper: The Effect of Horizontal Mergers, When Firms compete in Prices and Investments (2018)
Working Paper: The Effect of Horizontal Mergers, when Firms Compete in Prices and Investments (2017)
Working Paper: The effect of horizontal mergers, when firms compete in prices and investments (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1579
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