SFB 303 Discussion Paper No. A - 139

Author: Zachau, Ulrich
Title: Mergers in the Model of an R+D-race
Abstract: In this paper I analyse a model of a patent race in which mergers increase the R+D-efficiency of the merging firms. Mergers increase the R+D-effort and the profits of the merging firms and decrease those of the outside firms. By increasing the aggregate R+D-effort in the industry, they shorten the time period needed for the innovation. Typically, a merger of all firms does not maximise the profits of the merged firm per constituent firm, which makes it possible to explain mergers other than those into monopoly. The model can also be interpreted as a non-linear Cournot model; it can then be used as an explanation of mergers in a product market that lower the marginal costs of the merging firms
Creation-Date: November 1987
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