Citation

Discussion Paper Details

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Title: An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly

Author(s): Volker Nocke and Nicolas Schutz

Publication Date: May 2018

Keyword(s): Aggregative Game, Herfindahl index, Horizontal Merger, market power, Multiproduct Firms and Oligopoly Pricing

Programme Area(s): Industrial Organization

Abstract: 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 oligopoly distortions to consumer surplus and aggregate surplus, 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.

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Bibliographic Reference

Nocke, V and Schutz, N. 2018. 'An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12905