We study sequential merger incentives under presence of product differentiation. Two sets of firms produce closely related goods, whereas each set produces more differentiated goods. Merger incentives under product differentiation are found to be stronger for two firms producing closely related goods than more differentiated goods. Also, after one merger, other firms are willing to follow with their own merger, resulting in sequential mergers. This result is consistent with the recent mergers in the video game software industry in Japan. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd/University of Adelaide and Flinders University.
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