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Equilibrium mergers in a composite industry

Author

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  • Cristina Pardo-Garcia

    () (ERI-CES)

Abstract

This industry is formed by single-component producers whose components are combined to create composite goods. When a given firm has the possibility of merging with either a complement or a substitute good producer, its equilibrium choice depends on the degree of product differentiation in the composite good market. A merger between complements, which allows for mixed bundling, only happens when composite goods are very differentiated. Private incentives do not always go along with social interests and the equilibrium merger can differ from the socially optimal merger. After a merger, outsiders have also the opportunity to react and merge to other outsiders or to join the previous merge.

Suggested Citation

  • Cristina Pardo-Garcia, 2010. "Equilibrium mergers in a composite industry," Discussion Papers in Economic Behaviour 0410, University of Valencia, ERI-CES.
  • Handle: RePEc:dbe:wpaper:0410
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    File URL: https://www.uv.es/erices/RePEc/WP/2010/0410.pdf
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    Cited by:

    1. Ricardo Flores-Fillol & Rafael Moner-Colonques, 2011. "Endogenous Mergers of Complements with Mixed Bundling," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(3), pages 231-251, November.

    More about this item

    Keywords

    merger; composite goods; substitutes; complements; pricing strategies; countermerger;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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