The Coordinated Effects of Mergers in Differentiated Products Markets
AbstractThe Paper addresses the issue of coordinated effects of mergers in the framework of a differentiated products model. Firms’ assets are product varieties that can be sold individually or entirely transferred to another firm in a merger. We show that under symmetric optimal punishment schemes the highest feasible collusive price declines from any asset transfer to the largest firm as long as the size of the smallest firm is unchanged. In contrast, for fully optimal punishment schemes the prices of firms that get larger increase and those of firms that get smaller decrease. In all cases, however, mergers are unprofitable unless the length of product lines is very asymmetric. We discuss the implications of the analysis for merger policy.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4769.
Date of creation: Dec 2004
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Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-07 (All new papers)
- NEP-COM-2005-05-07 (Industrial Competition)
- NEP-LAW-2005-05-07 (Law & Economics)
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- Kai-Uwe Kühn, 2005. "Collusion Theory in Search of Robust Themes: A Comment on Switgard Feuerstein's Survey," Journal of Industry, Competition and Trade, Springer, vol. 5(3), pages 207-215, December.
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