The effect of horizontal mergers, when firms compete in prices and investments


Motta, Massimo ; Tarantino, Emanuele


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URL: https://ub-madoc.bib.uni-mannheim.de/42805
URN: urn:nbn:de:bsz:180-madoc-428052
Document Type: Working paper
Year of publication: 2017
The title of a journal, publication series: Working Paper Series
Volume: 17-01
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > VWL, Mikroökonomik (Juniorprofessur) (Tarantino 2014-)
MADOC publication series: Department of Economics > Working Paper Series
Subject: 330 Economics
Classification: JEL: K22 , D43 , L13 , L41,
Abstract: It has been suggested that mergers, by increasing concentration, raise incentives to invest and hence are pro-competitive. To study the effects of mergers, we rewrite a game with simultaneous price and cost-reducing investment choices as one where firms only choose prices, and make use of aggregative game theory. We find no support for that claim: absent effciency gains, the merger lowers total investments and consumer surplus.Only if it entails suffcient effciency gains, will it be pro-competitive. We also show there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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Motta, Massimo ; Tarantino, Emanuele (2017) The effect of horizontal mergers, when firms compete in prices and investments. Open Access Working Paper Series Mannheim 17-01 [Working paper]
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