Horizontal merger of differentiated firms with product consolidation: The effect of change in substitutability

Nobuo Matsubayashi, Tatsuya Hashimoto

Research output: Contribution to journalArticle

Abstract

This paper studies an effect of a horizontal merger where a product consolidation by the merged firm may alter the substitutability in the industry. We show that as the number of firms in the industry increases, this type of merger becomes profitable for merging firms, while unprofitable for non-merging firms. Furthermore, we show that with a moderate level of change in the substitutability, the merger of a larger number of firms with a product consolidation is not necessarily profitable for merging firms.

Original languageEnglish
Pages (from-to)94-102
Number of pages9
JournalEconomics Bulletin
Volume30
Issue number1
Publication statusPublished - 2010

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ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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