%S TSE Working Paper
%A Bruno Jullien
%A Yassine Lefouili
%T Mergers and investments in new products
%X We investigate the impact of a horizontal merger between two competitors on their incentives to invest in R&D that generates new products. We show that a merger raises the incentives to innovate if and only if the merged entity’s incremental gain from a second innovation is greater than the individual profit of a firm when both firms innovate in the no-merger scenario. Applying this result to the Hotelling model, we find that a merger spurs innovation if the degree of product differentiation is not too high, and show that a merger can be beneficial to consumers.
%K Horizontal Mergers, Product Innovation, R&D Investments.
%B TSE Working Paper
%V 18-949
%D 2018
%C Toulouse
%I TSE Working Paper
%L publications26230