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Multiproduct mergers and quality competition

Author

Listed:
  • Justin Pappas Johnson
  • Andrew Rhodes

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We investigate mergers in markets where quality differences between products are central and firms may reposition their product lines by adding or removing products of different qualities following a merger. Such mergers are materially different from those studied in the existing literature. Mergers without synergies may exhibit a product-mix effect which raises consumer surplus, but only when the pre-merger industry structure satisfies certain observable features. Post-merger synergies may lower consumer surplus. The level of, and changes in, the Herfindahl–Hirschman Index may give a misleading assessment of how a merger affects consumers. A merger may benefit some outsiders but harm others.

Suggested Citation

  • Justin Pappas Johnson & Andrew Rhodes, 2021. "Multiproduct mergers and quality competition," Post-Print hal-03356744, HAL.
    • Handle: RePEc:hal:journl:hal-03356744
    DOI: 10.1111/1756-2171.12386
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    Cited by:

    1. Jackie M.L. Chan & Michael Irlacher & Michael Koch, 2022. "Multiproduct Mergers and the Product Mix in Domestic and Foreign Markets," Economics working papers 2022-03, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Justin P. Johnson & Andrew Rhodes, 2021. "Multiproduct mergers and quality competition," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 633-661, September.
    3. Anna D'Annunzio & Antonio Russo, 2022. "Ad Valorem Taxation in a Multiproduct Monopoly," CESifo Working Paper Series 9881, CESifo.
    4. Christos Genakos & Felix Grey & Robert Ritz, 2020. "Generalized linear competition: From pass-through to policy," Working Papers EPRG2023, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    5. Volker Nocke & Nicolas Schutz, 2023. "Merger Analysis with IIA Demand and Type Aggregation," CRC TR 224 Discussion Paper Series crctr224_2023_459, University of Bonn and University of Mannheim, Germany.
    6. Gilbert, Richard J. & Katz, Michael L., 2022. "Dynamic merger policy and pre-merger product choice by an entrant," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    7. Nisvan Erkal & Lijun Pan, 2022. "Horizontal Merger Analysis with Endogenous Product Range Choice," ISER Discussion Paper 1162, Institute of Social and Economic Research, The University of Osaka.
    8. Meilin MA & Ralph Bernd Siebert, 2024. "The Impact of Private Label Introduction on Assortment, Prices, and Profits of Retailers," Journal of Industrial Economics, Wiley Blackwell, vol. 72(1), pages 356-389, March.
    9. José Luis Moraga‐González & Evgenia Motchenkova & Saish Nevrekar, 2022. "Mergers and innovation portfolios," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 641-677, December.
    10. Leard, Benjamin & Linn, Joshua & Springel, Katalin, 2023. "Vehicle Attribute Tradeoffs and the Distributional Effects of US Fuel Economy and Greenhouse Gas Emissions Standards," RFF Working Paper Series 23-04, Resources for the Future.

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