An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly / Volker Nocke, Nicolas Schutz.

Format:

Book

Author/Creator:

Nocke, Volker.

Contributor:

National Bureau of Economic Research.

Schutz, Nicolas.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24578.

NBER working paper series no. w24578

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the welfare distortions introduced by market power, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.

Notes:

Print version record

May 2018.