Equilibrium mergers in a composite good industry with efficiencies

PARDO-GARCIA, Cristina;SEMPERE-MONNERIS, Jose J.
(2015) SERIEs : journal of the Spanish Economic Association — Vol. 6, p. 101-127 (2015)

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  • PARDO-GARCIA, CristinaUniversity of Valencia
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  • SEMPERE-MONNERIS, Jose J.University of Valencia
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Abstract
Thispaperstudiesequilibriummergingbehaviorincompositegoodindus- tries. Component producers face the option to either merge with a similar component producer (horizontal merger) or a complementary one (vertical merger) of a composite good. Focusing only on strategic reasons, vertical mergers arise at equilibrium only when composite goods are very differentiated or when the number of producers is large while horizontal mergers arise otherwise. When efficiencies are considered, higher marginal cost savings are required for a horizontal merger in a composite industry not to result in a price increase as compared with those required for a regular industry. This finding can be used by antitrust authorities to be more demanding when dealing with horizontal mergers in composite goods industries.
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PARDO-GARCIA, C., & SEMPERE-MONNERIS, J. J. (2015). Equilibrium mergers in a composite good industry with efficiencies. SERIEs : journal of the Spanish Economic Association, 6, 101-127. https://doi.org/10.1007/s13209-014-0121-y (Original work published 2015)