The Welfare Consequences of Mergers with Endogenous Product Choice

Michael J. Mazzeo, Katja Seim, Mauricio Varela

Research output: Contribution to journalArticle

Abstract

Merger 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.

Original languageEnglish (US)
Pages (from-to)980-1016
Number of pages37
JournalJournal of Industrial Economics
Volume66
Issue number4
DOIs
StatePublished - Dec 2018

    Fingerprint

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)
  • Economics and Econometrics

Cite this