The Coordinated Effects of Mergers in Differentiated Products Markets
52 Pages Posted: 15 Feb 2005
Date Written: December 2004
Abstract
The Paper addresses the issue of coordinated effects of mergers in the framework of a differentiated products model. Firms' assets are product varieties that can be sold individually or entirely transferred to another firm in a merger. We show that, under symmetric optimal punishment schemes, the highest feasible collusive price declines from any asset transfer to the largest firm as long as the size of the smallest firm is unchanged. In contrast, for fully optimal punishment schemes the prices of firms that get larger increase and those of firms that get smaller decrease. In all cases, however, mergers are unprofitable unless the length of product lines is very asymmetric. We discuss the implications of the analysis for merger policy.
Keywords: Collusion, product lines, mergers, coordinated effects, joint dominance
JEL Classification: D43, K21, L13, L41
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Reforming European Merger Review: Targeting Problem Areas in Policy Outcomes
By Kai-uwe Kuhn
-
Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game
By Massimo Motta and Helder Vasconcelos
-
An Economists' Guide Through the Joint Dominance Jungle
By Kai-uwe Kuhn
-
The Comparative Statics of Collusion Models
By Kai-uwe Kuhn and Michael S. Rimler
-
The Comparative Statics of Collusion Models
By Kai-uwe Kuhn and Michael S. Rimler
-
Closing Pandora's Box? Joint Dominance after the 'Airtours' Judgment
By Kai-uwe Kuhn
-
The Coordinated Effects of Mergers in Differentiated Products Markets
By Kai-uwe Kuhn
-
By Volker Nocke and Michael D. Whinston