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A Theory of Conglomerate Mergers

Author

Listed:
  • Zhijun Chen

    (Unknown)

  • Patrick Rey

    (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

This paper develops a novel theory of harm for conglomerate mergers, grounded on a key feature of ecosystems ñdemand-side synergies from product integration or one-stop shopping. Generating heterogeneous synergies can soften competition and generate higher stand-alone prices, thereby harming consumers with limited synergies and possibly reducing total consumer surplus and social welfare. In contrast to traditional foreclosure theories, precommitment to tying may raise rivals' prices and profits. Furthermore, when markets are concentrated and products are highly differentiated, tying and pure bundling can emerge as de facto best-responses, even in the absence of precommitment.

Suggested Citation

  • Zhijun Chen & Patrick Rey, 2026. "A Theory of Conglomerate Mergers," Working Papers hal-05489350, HAL.
    • Handle: RePEc:hal:wpaper:hal-05489350
    Note: View the original document on HAL open archive server: https://hal.science/hal-05489350v2
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    Cited by:

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    2. Axel Gautier & Leonardo Madio & Shiva Shekhar, 2025. "Network Externalities and Platform Strategy: Agency, Bundles Entry, and Integration," CESifo Working Paper Series 11711, CESifo.
    3. Martin Peitz, 2024. "The Economic Theory of Two-Sided Platforms," CRC TR 224 Discussion Paper Series crctr224_2024_584, University of Bonn and University of Mannheim, Germany.
    4. Paul Heidhues & Mats Köster & Botond Kőszegi & Botond Köszegi, 2024. "A Theory of Digital Ecosystems," CESifo Working Paper Series 11332, CESifo.
    5. Paul Heidhues & Mats Köster & Botond Kőszegi, 2024. "A Theory of Digital Ecosystems," ECONtribute Discussion Papers Series 329, University of Bonn and University of Cologne, Germany.

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