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Welfare-Enhancing Mergers Under Product Differentiation

  • TINA KAO
  • FLAVIO MENEZES

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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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2009.02145.x
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Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 78 (2010)
Issue (Month): 4 (07)
Pages: 290-301

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Handle: RePEc:bla:manchs:v:78:y:2010:i:4:p:290-301
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  1. 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.
  2. 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.
  3. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  4. repec:cup:cbooks:9780521016919 is not listed on IDEAS
  5. 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.
  6. 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.
  7. repec:cup:cbooks:9780521816632 is not listed on IDEAS
  8. 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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