Working paper
Mergers and Investments in New Products
Bruno Jullien, and Yassine Lefouili
n. 18-949, August 2018
Reference
Bruno Jullien, and Yassine Lefouili, “Mergers and Investments in New Products”, TSE Working Paper, n. 18-949, August 2018.
Abstract
We investigate the impact of a horizontal merger between two competitors on their incentives to develop new products. We show that a merger raises the incentives to innovate if and only if the merged entity's incremental gain from a second innovation is larger than the individual profit of an innovator when both firms innovate in the no-merger scenario. Applying this result to the Hotelling model, we find that a merger spurs innovation and can be beneficial to consumers if the degree of product differentiation is positive but not too high.
Keywords
Merger Policy; Product Innovation; R&D Investments;
JEL codes
- K21: Antitrust Law
- L13: Oligopoly and Other Imperfect Markets
- L40: General