Innovation and horizontal mergers in a vertically related industry

Guiomar Ibáñez Zarate

Working Papers from Universitat Rovira i Virgili, Department of Economics

Abstract: This paper analyzes the effects of horizontal mergers on innovation and consumer welfare in a vertically related industry context, in which downstream firms compete for customers with a differentiated final good and can undertake R&D activities to reduce their unit costs. Upstream and downstream horizontal mergers can take place. The results suggest that competition authorities aiming to promote innovation and consumer welfare should treat upstream and downstream mergers differently, since horizontal mergers between upstream firms are detrimental to innovation and consumer welfare. By contrast, policy makers should evaluate the market characteristics under downstream integration. We show that downstream horizontal mergers can be both innovation and consumer welfare enhancing in the short run, when the markets are sufficiently small. Keywords: Horizontal Mergers. Innovation. Vertical Relations. JEL Classification Numbers: L22, L41, O32

Keywords: Empreses; Direcció general d'; Monopolis; Innovacions tecnològiques -- Direcció i administració; 33 - Economia (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind and nep-ino
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Persistent link: https://EconPapers.repec.org/RePEc:urv:wpaper:2072/242274

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