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Merger Profitability in Industries with Brand Portfolios and Loyal CustomersKai A. KonradMax Planck Institute for Tax Law and Public Finance; Social Science Research Center Berlin (WZB); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA) May 1, 2010 WZB Markets and Politics Working Paper No. SP II 2010-08 Abstract: We study the equilibrium effects of mergers between firms with brand portfolios and brand loyal customers for pricing and profitability. We find that the "merger paradox" (Salant, Switzer and Reynolds 1983) is absent in these markets. The acquisition of brand portfolios can be profit enhancing for the merging firms and payoff neutral for the firms not involved in the merger. This may explain the emergence of brand conglomerates such as Richemont, PPR or LVMH.
Number of Pages in PDF File: 23 Keywords: Brand portfolios, merger profitability, customer loyalty JEL Classification: D43, L22, M31 working papers seriesDate posted: October 23, 2010Suggested CitationContact Information
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