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Multiproduct mergers and quality competition.

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...

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Published in:RAND Journal of Economics (Wiley-Blackwell) Vol. 52; no. 3; pp. 633 - 662
Main Authors: Johnson, Justin P., Rhodes, Andrew
Format: Article
Published: Wiley-Blackwell Sep2021
Subjects:
Consumers' surplus
Product lines
Herfindahl-Hirschman index
Product quality
Online Access:View this record in EBSCOhost
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      dt: Sep2021
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      tig:
        atl: Multiproduct mergers and quality competition.
      aug:
        au:
          Johnson, Justin P.
          Rhodes, Andrew
        affil:
          Johnson Graduate School of Management, Cornell University
          Toulouse School of Economics, University of Toulouse Capitole
      su:
        Consumers' surplus
        Product lines
        Herfindahl-Hirschman index
        Product quality
      sug:
        subj:
          Consumers' surplus
          Product lines
          Herfindahl-Hirschman index
          Product quality
      ab: 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.
      pubtype: Academic Journal
      doctype: Article
      src: R
    language: English
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