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An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly

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  • Nocke, Volker
  • Schutz, Nicolas

Abstract

Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the oligopoly distortions to consumer surplus and aggregate surplus, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.

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  • Nocke, Volker & Schutz, Nicolas, 2018. "An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly," CEPR Discussion Papers 12905, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12905
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    Cited by:

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    2. Spiegel, Yossi, 2019. "The Herfindahl-Hirschman Index and the distribution of social surplus," CEPR Discussion Papers 13925, C.E.P.R. Discussion Papers.
    3. José Luis Moraga‐González & Evgenia Motchenkova & Saish Nevrekar, 2022. "Mergers and innovation portfolios," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 641-677, December.
    4. Tommaso Valletti & Hans Zenger, 2021. "Mergers with Differentiated Products: Where Do We Stand?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 179-212, February.
    5. Michele Fioretti & Jorge Tamayo, 2021. "Saving for a Dry Day: Coal, Dams, and the Energy Transition," Working Papers hal-03389152, HAL.
    6. Nocke, Volker & Whinston, Michael D., 2020. "Concentration Screens for Horizontal Mergers," CEPR Discussion Papers 14979, C.E.P.R. Discussion Papers.
    7. Vanessa Alviarez & Keith Head & Thierry Mayer, 2020. "Global giants and local stars: How changes in brand ownership affect competition," Working Papers 2020-13, CEPII research center.
    8. Breinlich, Holger & Fadinger, Harald & Nocke, Volker & Schutz, Nicolas, 2020. "Gravity with Granularity," CEPR Discussion Papers 15374, C.E.P.R. Discussion Papers.
    9. Sato, Susumu, 2021. "Market shares and profits in two-sided markets," Economics Letters, Elsevier, vol. 207(C).
    10. repec:hal:wpspec:info:hdl:2441/6q707l4svn8k3bt630nhgdqgdu is not listed on IDEAS
    11. C. Luke Watson & Oren Ziv, 2021. "Is the Rent Too High? Land Ownership and Monopoly Power," CESifo Working Paper Series 8864, CESifo.
    12. Nisvan Erkal & Lijun Pan, 2022. "Horizontal Merger Analysis with Endogenous Product Range Choice," ISER Discussion Paper 1162, Institute of Social and Economic Research, Osaka University.
    13. Nathan H. Miller & Gloria Sheu, 2021. "Quantitative Methods for Evaluating the Unilateral Effects of Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 143-177, February.
    14. Justin P. Johnson & Andrew Rhodes, 2021. "Multiproduct mergers and quality competition," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 633-661, September.
    15. repec:hal:spmain:info:hdl:2441/6q707l4svn8k3bt630nhgdqgdu is not listed on IDEAS
    16. Simon P. Anderson & Nisvan Erkal & Daniel Piccinin, 2020. "Aggregative games and oligopoly theory: short‐run and long‐run analysis," RAND Journal of Economics, RAND Corporation, vol. 51(2), pages 470-495, June.
    17. repec:hal:spmain:info:hdl:2441/1qif9fqehq930ovnr511k1el4f is not listed on IDEAS
    18. Yossi Spiegel, 2021. "The Herfindahl‐Hirschman Index and the Distribution of Social Surplus," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 561-594, September.
    19. Haucap, Justus & Stiebale, Joel, 2023. "Non-price effects of mergers and acquisitions," DICE Discussion Papers 402, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    20. repec:hal:wpspec:info:hdl:2441/1qif9fqehq930ovnr511k1el4f is not listed on IDEAS
    21. Gábor Koltay & Szabolcs Lorncz & Tommaso M. Valletti, 2022. "Concentration and Competition: Evidence from Europe and Implications for Policy," CESifo Working Paper Series 9640, CESifo.
    22. Wang, X. Henry & Zhao, Jingang, 2022. "Merger effects in asymmetric and differentiated Bertrand oligopolies," Mathematical Social Sciences, Elsevier, vol. 120(C), pages 37-49.
    23. Garcia, Arturo & Leal, Mariel & Lee, Sang-Ho, 2020. "Merger incentive and strategic CSR by a multiproduct corporation," MPRA Paper 98830, University Library of Munich, Germany.

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    More about this item

    Keywords

    Multiproduct firms; Aggregative game; Oligopoly pricing; market power; Horizontal merger; Herfindahl index;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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