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Multiproduct mergers and quality competition
Author(s) -
Johnson Justin P.,
Rhodes Andrew
Publication year - 2021
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12386
Subject(s) - competition (biology) , harm , herfindahl index , quality (philosophy) , product differentiation , business , product (mathematics) , industrial organization , economic surplus , index (typography) , microeconomics , economics , marketing , cournot competition , market economy , welfare , mathematics , epistemology , world wide web , political science , computer science , law , biology , ecology , philosophy , geometry
We investigate mergers in markets where quality differences between products are central and firms may reposition their product lines by adding or removing products of different qualities following a merger. Such mergers are materially different from those studied in the existing literature. Mergers without synergies may exhibit a product‐mix effect which raises consumer surplus, but only when the pre‐merger industry structure satisfies certain observable features. Post‐merger synergies may lower consumer surplus. The level of, and changes in, the Herfindahl–Hirschman Index may give a misleading assessment of how a merger affects consumers. A merger may benefit some outsiders but harm others.