Multiproduct Mergers and Quality Competition

Johnson, Justin Pappas and Rhodes, Andrew (2018) Multiproduct Mergers and Quality Competition. TSE Working Paper, n. 18-967, Toulouse

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Official URL: http://tse-fr.eu/pub/33104

Abstract

We investigate mergers in markets where quality differences between products are central. In our model, firms may sell multiple products, and merging and non-merging firms may reposition their product lines by adding or removing products following a merger. We find that such mergers are materially different from those studied in the existing literature. Mergers without synergies may raise consumer surplus, but only when the pre-merger industry structure satisfies certain observable features. Synergies may lower consumer surplus. Mergers are more readily profitable when an industry exhibits multiple qualities, and mergers between small numbers of firms with small market shares may be profitable. Some nonmerging firms may benefit while others lose following a merger. We also provide a new measure of industry concentration: the Quality-adjusted Herfindahl-Hirschman Index extends the standard Herfindahl-Hirschman Index to markets in which quality differences are central.

Item Type: Monograph (Working Paper)
Language: English
Date: November 2018
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 19 Nov 2018 11:12
Last Modified: 11 Jul 2019 14:35
OAI ID: oai:tse-fr.eu:33104
URI: http://publications.ut-capitole.fr/id/eprint/26443

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