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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper Series ; No. 17-01

Classification and Topics

• Classification: Wirtschaft ; Business and Securities Law ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets ; Monopolization; Horizontal Anticompetitive Practices
• Subject: horizontal mergers ; innovation ; investments ; network-sharing agreements ; competition

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Motta, Massimo ; Tarantino, Emanuele
• Event: Veröffentlichung
• (who): University of Mannheim, Department of Economics
• (where): Mannheim
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/179359
• URN: urn:nbn:de:bsz:180-madoc-428052
• Last update: 10.03.2025, 11:41 AM CET