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Analysis of Merger Control in A Network Products Market

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  • Tsuyoshi Toshimitsu

    () (School of Economics, Kwansei Gakuin University)

Abstract

Using a horizontally differentiated three-firm model, we consider horizontal merger and antitrust policy in a network products market, where we observe network externalities and compatibilities (interconnectivities) between products and services. In particular, if the degree of network compatibilities in the case of a merger is sufficiently larger than that of product substitutability, consumer surplus is larger than in the premerger case. Thus, the proposed merger is allowed by antitrust authorities based on the positive effect on consumer surplus. In this case, the merger is Pareto improving.

Suggested Citation

  • Tsuyoshi Toshimitsu, 2017. "Analysis of Merger Control in A Network Products Market," Discussion Paper Series 169, School of Economics, Kwansei Gakuin University, revised Nov 2017.
  • Handle: RePEc:kgu:wpaper:169
    as

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    File URL: http://192.218.163.163/RePEc/pdf/kgdp169.pdf
    File Function: First version, 2017
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    References listed on IDEAS

    as
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    4. Volker Nocke & Michael D. Whinston, 2010. "Dynamic Merger Review," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1201-1251.
    5. Neven, Damien J. & Roller, Lars-Hendrik, 2005. "Consumer surplus vs. welfare standard in a political economy model of merger control," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 829-848, December.
    6. di Giovanni, Julian, 2005. "What drives capital flows? The case of cross-border M&A activity and financial deepening," Journal of International Economics, Elsevier, vol. 65(1), pages 127-149, January.
    7. Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 323-342, September.
    8. Breinlich, Holger & Nocke, Volker & Schutz, Nicolas, 2017. "International aspects of merger policy: A survey," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 415-429.
    9. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
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    14. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
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    16. Kenneth Heyer, 2006. "Welfare Standards and Merger Analysis: Why not the Best?," EAG Discussions Papers 200608, Department of Justice, Antitrust Division.
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    More about this item

    Keywords

    horizontal merger; antitrust policy; network externality; compatibility; consumer surplus standard; horizontally differentiated Cournot competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • 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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