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Innovation and horizontal mergers in a vertically related industry

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  • Ibáñez Zarate, Guiomar

Abstract

This paper analyzes the effects of horizontal mergers on innovation and consumer welfare in a vertically related industry context, in which downstream firms compete for customers with a differentiated final good and can undertake R&D activities to reduce their unit costs. Upstream and downstream horizontal mergers can take place. The results suggest that competition authorities aiming to promote innovation and consumer welfare should treat upstream and downstream mergers differently, since horizontal mergers between upstream firms are detrimental to innovation and consumer welfare. By contrast, policy makers should evaluate the market characteristics under downstream integration. We show that downstream horizontal mergers can be both innovation and consumer welfare enhancing in the short run, when the markets are sufficiently small. Keywords: Horizontal Mergers. Innovation. Vertical Relations. JEL Classification Numbers: L22, L41, O32

Suggested Citation

  • Ibáñez Zarate, Guiomar, 2014. "Innovation and horizontal mergers in a vertically related industry," Working Papers 2072/242274, Universitat Rovira i Virgili, Department of Economics.
    • Handle: RePEc:urv:wpaper:2072/242274
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    References listed on IDEAS

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    More about this item

    Keywords

    Empreses; Direcció general d'; Monopolis; Innovacions tecnològiques -- Direcció i administració; 33 - Economia;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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