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Merger under horizontal and vertical product differentiation

Author

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  • Neelanjan Sen
  • Drishti Narula

Abstract

This paper studies the possibility of a merger when firms are asymmetric in marginal costs and produce vertically and horizontally differentiated products. The merger of two firms that produce the better‐quality products (w.r.t. third firm) is possible, if the quality difference (net of cost) or the horizontal product differentiation between the firms that merge is high. If the quality difference (net of cost) between the merged firms and the non‐merged firm increases, then a merger is possible if the quality difference (net of cost) and the horizontal product differentiation of the merged firms are significantly high.

Suggested Citation

  • Neelanjan Sen & Drishti Narula, 2022. "Merger under horizontal and vertical product differentiation," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 509-531, December.
    • Handle: RePEc:bla:ijethy:v:18:y:2022:i:4:p:509-531
    DOI: 10.1111/ijet.12329
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    References listed on IDEAS

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    4. Roberto Cellini, 2021. "Whom should I merge with? How product substitutability affects merger profitability," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(3), pages 337-353, September.
    5. Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
    6. J. Alejandro Gelves, 2014. "Differentiation and Cost Asymmetry: Solving the Merger Paradox," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 21(3), pages 321-340, November.
    7. 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.
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    Cited by:

    1. Shih‐Shen Chen & Chu‐Chuan Hsu & Po‐Sheng Ko, 2025. "Asymmetric Choice of Relative‐Performance Delegation Under Duopoly Competition With Vertical Product‐Quality Difference," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(5), pages 2869-2875, July.
    2. Neelanjan Sen & Urvashi Tandon & Rajit Biswas, 2024. "Collusion under product differentiation," Journal of Economics, Springer, vol. 142(1), pages 1-43, June.

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