Monday, November 2, 2009
Posted by D. Daniel Sokol
Tina Kao and (ANU - Econ) Flavio Menezes (Queensland - Econ) analyze Welfare Enhancing Mergers Under Product Differentiation.
ABSTRACT: This paper considers a model of duopoly with differentiated products to examine the welfare effects of a merger between two asymmetric firms. We find that for quantity competition, the parameter range for welfare enhancing merger widens if the products are closer substitutes. On the other hand, mergers are never welfare enhancing in this setting when firms compete in prices.