Welfare Enhancing Mergers under Product Differentiation
We follow the duopoly framework with differentiated products as in Singh and Vives (1984) and Zanchettin (2006) and examine the welfare effects of a merger between two asymmetric firms. We find that for quantity competition, the merger increases total welfare if the cost asymmetry falls into a specific range. Furthermore, this parameter range widens if the products are closer substitutes. On the other hand, mergers are never welfare enhancing in this setting when firms compete in prices.
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Springer, vol. 17(3), pages 277-284, November.
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17, Princeton, Woodrow Wilson School - Discussion Paper.
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