Template-Type: ReDIF-Paper 1.0
Title: The Effect of Horizontal Mergers, When Firms compete in Prices and Investments
Author-Name: Massimo Motta
Author-Email: massimo.motta@upf.edu
Author-Name: Emanuele Tarantino
Author-Email: tarantino@uni-mannheim.de
Classification-JEL: K22, D43, L13, L41
Keywords:  horizontal mergers, innovation, investments, research joint ventures, competition

Abstract: We study the effects of mergers when firms offer differentiated products and compete in prices 
and investments. Since it is in principle ambiguous, we use aggregative game theory to sign the net effect 
of the merger: We find that only if it entailed sufficient efficiency gains, could the merger raise total 
investments and consumer surplus. We also prove there exist classes of models for which the results obtained 
with cost-reducing investments are equivalent to those with quality-enhancing investments. Finally, 
we show that, from the consumer welfare point of view, a R&D cooperative agreement is superior to any 
consumer-welfare reducing merger.

Note: 
Length: 56
Creation-Date: 2018-11
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp056
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2018_056