Horizontal Mergers and Product Quality

Kurt Brekke (), Luigi Siciliani and Odd Rune Straume

No 07/2014, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: Using a spatial competition framework with three ex ante identical firms, we study the effects of a horizontal merger on quality, price and welfare. The merging firms always reduce quality. They also increase prices if demand responsiveness to quality is sufficiently low. The non-merging firm, on the other hand, always responds by increasing both quality and prices. Overall, a merger leads to higher average prices and quality in the market. The welfare implications of a merger are not clear-cut. If the demand responsiveness to quality is sufficiently high, some consumers benefit from the merger and social welfare might also increase.

Keywords: Horizontal mergers; Quality; Spatial CompetitionCreation-Date: 2014 (search for similar items in EconPapers)
JEL-codes: L13 L15 L41 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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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 (2015)
Working Paper: Horizontal Mergers and Product Quality (2014)
Working Paper: Horizontal Mergers and Product Quality- (2014)
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