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WELFARE‐ENHANCING MERGERS UNDER PRODUCT DIFFERENTIATION
Author(s) -
KAO TINA,
MENEZES FLAVIO
Publication year - 2010
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02145.x
Subject(s) - duopoly , product differentiation , economics , welfare , competition (biology) , microeconomics , industrial organization , product (mathematics) , consumer welfare , market economy , geometry , mathematics , ecology , biology
In this paper we consider a model of duopoly with differentiated products to examine the welfare effects of a merger between two asymmetric firms. We find that, for quantity competition, the parameter range for welfare‐enhancing merger widens if the products are closer substitutes. On the other hand, mergers are never welfare enhancing in this setting when firms compete in prices.