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Mergers of complements, endogenous product differentiation and welfare

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journal contribution
posted on 2023-09-15, 10:28 authored by Tien-Der HanTien-Der Han, Arijit Mukherjee

The static analysis shows that a merger among complementary input suppliers or complementary patent holders benefits the consumers and the society by reducing the input prices. We show that the effects of a merger of complements are not so straightforward in a dynamic set up with endogenous product differentiation in the final goods market. The merger of complements reduces the total input prices and increases product differentiation. However, whether it increases or decreases consumer surplus and welfare depends on the market expansion following product differentiation, the number of merged input suppliers and the intensity of competition. Hence, in a dynamic setup with endogenous product differentiation, the antitrust authorities may need to be more careful about mergers of complements. Our analysis has also relevance for vertical mergers.

Funding

Loughborough University

History

School

  • Loughborough Business School

Published in

Mathematical Social Sciences

Publisher

Elsevier

Version

  • P (Proof)

Rights holder

© The Author(s)

Publisher statement

This is a PDF file of an article that has undergone enhancements after acceptance, such as the addition of a cover page and metadata, and formatting for readability, but it is not yet the definitive version of record. This version will undergo additional copyediting, typesetting and review before it is published in its final form, but we are providing this version to give early visibility of the article. Please note that, during the production process, errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

Acceptance date

2023-09-01

Publication date

2023-09-15

Copyright date

2023

ISSN

0165-4896

eISSN

1879-3118

Language

  • en

Depositor

Dr Tien-Der Jerry Han. Deposit date: 14 September 2023