Welfare Enhancing Mergers under Product Differentiation
AbstractWe follow the duopoly framework with differentiated products as in Singh and Vives (1984) and Zanchettin (2006) and examine the welfare effects of a merger between two asymmetric firms. We find that for quantity competition, the merger increases total welfare if the cost asymmetry falls into a specific range. Furthermore, this parameter range widens if the products are closer substitutes. On the other hand, mergers are never welfare enhancing in this setting when firms compete in prices.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 350.
Date of creation: 2007
Date of revision:
Other versions of this item:
- Tina Kao & Flavio Menezes, 2010. "Welfare-Enhancing Mergers Under Product Differentiation," Manchester School, University of Manchester, vol. 78(4), pages 290-301, 07.
- Tina Kao & Flavio Menezes, 2009. "Welfare Enhancing Mergers Under Product Differentiation," ANU Working Papers in Economics and Econometrics 2009-508, Australian National University, College of Business and Economics, School of Economics.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-24 (All new papers)
- NEP-BEC-2007-09-24 (Business Economics)
- NEP-COM-2007-09-24 (Industrial Competition)
- NEP-MIC-2007-09-24 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
- Joseph Farrell and Carl Shapiro., 1988.
"Horizontal Mergers: An Equilibrium Analysis,"
Economics Working Papers
8880, University of California at Berkeley.
- Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
- David Hennessy, 2000.
"Cournot Oligopoly Conditions under which Any Horizontal Merger Is Profitable,"
Review of Industrial Organization,
Springer, vol. 17(3), pages 277-284, November.
- Hennessy, David A., 2000. "Cournot Oligopoly Conditions Under Which Any Horizontal Merger is Profitable," Staff General Research Papers 1699, Iowa State University, Department of Economics.
- Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, April.
- Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- Häckner, Jonas, 1999.
"A Note on Price and Quantity Competition in Differentiated Oligopolies,"
Research Papers in Economics
1999:9, Stockholm University, Department of Economics.
- Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, vol. 93(2), pages 233-239, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Randal Anderson).
If references are entirely missing, you can add them using this form.