The Welfare Consequences of Mergers with Endogenous Product Choice
AffiliationUniv Arizona, Dept Econ
MetadataShow full item record
CitationMazzeo, M. J., Seim, K., & Varela, M. (2018). The welfare consequences of mergers with endogenous product choice. The Journal of Industrial Economics, 66(4), 980-1016.
JournalJOURNAL OF INDUSTRIAL ECONOMICS
RightsCopyright © 2019 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd
Collection InformationThis item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at email@example.com.
AbstractMerger simulations focus on the price changes that result once previously independent competitors set prices jointly and other market participants respond. We consider the incentives for firms to adjust the set of offered products after a merger. Using a model of product choice and pricing, we conduct simulations of equilibrium market outcomes of a merger in a variety of scenarios. Product offering adjustments result in additional effects on profitability and consumer welfare not realized by price responses only, particularly when the merging parties offer relatively similar products pre-merger. Cost synergies may furthermore entail the pro-competitive introduction of additional products.
Note12 month embargo; published online 02 June 2019
VersionFinal accepted manuscript