Welfare Enhancing Mergers under Product Differentiation
Abstract
We 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 Info
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Paper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 350.Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:qld:uq2004:350
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Keywords: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)
References
References listed on IDEASPlease 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.:
- Farrell, Joseph & Shapiro, Carl, 1988.
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Department of Economics, Working Paper Series
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- Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
- Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
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- Hennessy, David A., 2000.
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Staff General Research Papers
1699, Iowa State University, Department of Economics.
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- 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.
- Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
- Häckner, Jonas, 1999.
"A Note on Price and Quantity Competition in Differentiated Oligopolies,"
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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.
- 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.
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