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An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly

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  • Volker Nocke
  • Nicolas Schutz

Abstract

Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the welfare distortions introduced by market power, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.

Suggested Citation

  • Volker Nocke & Nicolas Schutz, 2018. "An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly," CRC TR 224 Discussion Paper Series crctr224_2018_024, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2018_024
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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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