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Welfare-Enhancing Mergers Under Product Differentiation




In this paper we consider a model of duopoly with differentiated products to examine the welfare effects of a merger between two asymmetric firms. We find that, for quantity competition, the parameter range for welfare-enhancing merger widens if the products are closer substitutes. On the other hand, mergers are never welfare enhancing in this setting when firms compete in prices. Copyright © 2010 The Authors. Journal compilation © 2010 Blackwell Publishing Ltd and The University of Manchester.

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  • Tina Kao & Flavio Menezes, 2010. "Welfare-Enhancing Mergers Under Product Differentiation," Manchester School, University of Manchester, vol. 78(4), pages 290-301, July.
  • Handle: RePEc:bla:manchs:v:78:y:2010:i:4:p:290-301

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    References listed on IDEAS

    1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, March.
    2. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    3. 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.
    4. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    5. David Hennessy, 2000. "Cournot Oligopoly Conditions under which Any Horizontal Merger Is Profitable," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(3), pages 277-284, November.
    6. 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.
    7. Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
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    Cited by:

    1. Apostolis Pavlou, 2015. "Learning by doing and horizontal mergers," Journal of Economics, Springer, vol. 116(1), pages 25-38, September.
    2. Nisvan Erkal & Daniel Piccinin, 2010. "Welfare-Reducing Mergers in Differentiated Oligopolies with Free Entry," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 178-184, June.
    3. Fikru, Mahelet G. & Gautier, Luis, 2016. "Mergers in Cournot markets with environmental externality and product differentiation," Resource and Energy Economics, Elsevier, vol. 45(C), pages 65-79.
    4. Fikru, Mahelet G., 2016. "Modelling mergers among polluting firms when environmental policy is endogenous," Economic Analysis and Policy, Elsevier, vol. 49(C), pages 1-6.
    5. Mahelet G. Fikru & Matt Insall, 2016. "Is it more profitable to acquire cleaner or dirtier firms?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(4), pages 443-457, October.

    More about this item

    JEL classification:

    • 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


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