Microeconomics Seminar (ETH/UZH)

Multiproduct Mergers and Quality Competition

Justin Johnson (Cornell)
Multiproduct Mergers and Quality Competition
September 21, 2017 | 16:15 - 17:30 | SOF-G21

Abstract: We investigate mergers in an industry with multiproduct firms whose product lines are differentiated with respect to quality. We show that (compared to a market in which all firms sell a single product) the multiproduct nature has several important implications for assessing the welfare effects of mergers in addition to the profitability of mergers. A leading result is that mergers may raise consumer surplus even in the absence of cost synergies. This calls into question the classic antitrust view under which mergers that reduce the number of competitors must be balanced by cost savings or other synergies.