Monday, May 28, 2018

Analysis of Merger Control in A Network Products Market

Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) offers an Analysis of Merger Control in A Network Products Market.

ABSTRACT: Using a horizontally differentiated three-firm model, we consider horizontal merger and antitrust policy in a network products market, where we observe network externalities and compatibilities (interconnectivities) between products and services. In particular, if the degree of network compatibilities in the case of a merger is sufficiently larger than that of product substitutability, consumer surplus is larger than in the premerger case. Thus, the proposed merger is allowed by antitrust authorities based on the positive effect on consumer surplus. In this case, the merger is Pareto improving.

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