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.
Year of publication: |
2007
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Authors: | Menezes, Flavio ; Kao, Tina |
Institutions: | School of Economics, University of Queensland |
Saved in:
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