Profitable Competition With Mergers

Posted: 11 Oct 2018

See all articles by Kentaro Inomata

Kentaro Inomata

Competition Policy Research Center, Japan Fair Trade Commission

Date Written: September 19, 2018

Abstract

This paper investigates the profitability of a decrease in the degree of product differentiation. We consider some merger problems and obtain two results in both Cournot and Bertrand: First, upstream firms can increase their profits as the degree of product differentiation decreases when they take place intra-brand mergers. In that case, the welfare level is lower when upstream competition exists than when not. Second, an efficient firm loses its benefit as the degree of product differentiation decreases while the rival inefficient firm may increase its profit. It contrasts with Zanchettin (2006).

Keywords: Product Differentiation, Multi-Product Firm (MPF), Cournot and Bertrand, Double Marginalization, Merger

JEL Classification: L13, D43

Suggested Citation

Inomata, Kentaro, Profitable Competition With Mergers (September 19, 2018). Available at SSRN: https://ssrn.com/abstract=3251930

Kentaro Inomata (Contact Author)

Competition Policy Research Center, Japan Fair Trade Commission ( email )

Japan

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