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Horizontal Mergers and Product Quality-

Author

Listed:
  • Brekke, Kurt R.

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Siciliani, Luigi

    () (University of York)

  • Straume, Odd Rune

    () (University of Minho)

Abstract

Using a spatial competition framework with three ex ante identical firms, we study the effects of a horizontal merger on quality, price and welfare. The merging firms always reduce quality. They also increase prices if demand responsiveness to quality is sufficiently low. The non-merging firm, on the other hand, always responds by increasing both quality and prices. Overall, a merger leads to higher average prices and quality in the market. The welfare implications of a merger are not clear-cut. If the demand responsiveness to quality is sufficiently high, some consumers benefit from the merger and social welfare might also increase.

Suggested Citation

  • Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2014. "Horizontal Mergers and Product Quality-," Discussion Paper Series in Economics 4/2014, Norwegian School of Economics, Department of Economics.
  • Handle: RePEc:hhs:nhheco:2014_004
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    References listed on IDEAS

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    Cited by:

    1. Jaskold Gabszewicz, Jean & Marini, Marco A. & Tarola, Ornella, 2017. "Endogenous Mergers in Markets with Vertically Differentiated Products," MPRA Paper 80528, University Library of Munich, Germany.
    2. Marini, Marco A., 2016. "Collusive Agreements in Vertically Differentiated Markets," MPRA Paper 75369, University Library of Munich, Germany.
    3. repec:nip:nipewp:08/2015 is not listed on IDEAS
    4. Gabszewicz, Jean J. & Marini, Marco A. & Tarola, Ornella, 2015. "Endogenous Mergers in Vertically Differentiated Markets," MPRA Paper 68318, University Library of Munich, Germany.
    5. Miguel González-Maestre & Lluís M. Granero, 2016. "Merger policy in innovative industries," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(3), pages 131-147, December.

    More about this item

    Keywords

    Horizontal mergers; Quality; Spatial Competition.;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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