Horizontal Mergers and Product Quality

Kurt Brekke (), Luigi Siciliani and Odd Rune Straume

No 5406, CESifo Working Paper Series from CESifo

Abstract: We study the effects of horizontal mergers when firms compete on quality and price. Two key factors are identified: (i) the magnitude of variable quality costs, and (ii) the relative magnitudes of cross-quality and cross-price effects on demand. The merging firms will increase (reduce) both quality and price if the degree of competition is sufficiently stronger (weaker) on price than on quality. If variable quality costs are sufficiently small, non-merging firms will respond to a merger by either reducing or increasing both price and quality. Welfare implications are not clear-cut and mergers might improve welfare through endogenous fixed-cost savings.

Keywords: horizontal mergers; quality and price competition (search for similar items in EconPapers)
JEL-codes: L13 L15 L41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Horizontal mergers and product quality (2017)
Journal Article: Horizontal mergers and product quality (2017)
Working Paper: Horizontal Mergers and Product Quality (2014)
Working Paper: Horizontal Mergers and Product Quality- (2014)
Working Paper: Horizontal Mergers and Product Quality (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5406

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