Journal article
Pro-competitive horizontal merger with cost reducing investments and network externalities
Economic theory bulletin, Vol.13(1), pp.145-162
04/01/2025
DOI: 10.1007/s40505-024-00285-7
Abstract
We show that a merger can be pro-competitive in an industry with horizontally differentiated network goods and cost reducing investments. If there is firm-specific (industry-wide) network compatibility, the merged firm may produce all the products or one product (the merged firm produces all the products). Under both firm-specific and industry-wide compatibilities, merger may increase consumer surplus even for weak network externalities if the products are not close substitutes. In the case of firm-specific (industry-wide) network compatibility, there are situations where merger reduces (increases) consumer surplus under network externalities but increases (reduces) consumer surplus under no network externality. Hence, the antitrust authorities may (may not) need to be overly concerned about mergers in the presence of network externalities if there is firm-specific (industry-wide) network compatibility.
Details
- Title: Subtitle
- Pro-competitive horizontal merger with cost reducing investments and network externalities
- Creators
- Swapnendu Banerjee - Jadavpur UniversityArijit Mukherjee - University of NottinghamSougata Poddar - Univ Iowa, Tippie Coll Business, Dept Econ, Iowa City, IA 52242 USA
- Resource Type
- Journal article
- Publication Details
- Economic theory bulletin, Vol.13(1), pp.145-162
- DOI
- 10.1007/s40505-024-00285-7
- ISSN
- 2196-1085
- eISSN
- 2196-1093
- Publisher
- Springer Nature
- Number of pages
- 18
- Language
- English
- Date published
- 04/01/2025
- Academic Unit
- Economics
- Record Identifier
- 9984963421002771
Metrics
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