Sunday, October 13
Thu
Sep
26

Endogenous Merger under Product Differentiation and Price Competition: The Role of High-quality producer

Speakers:

Neelanjan SenMadras School of Economics

 
26
September,
2024
11:30 AM to 01:00 PM (IST)

Abstract:-

This paper studies the possibility of a bilateral merger under price competition in the presence of horizontal and vertical product differentiation. One firm produces a high-quality product and the other two firms produce a low-quality product. We show that i) a merger between a high-quality producer and a low-quality producer and ii) a merger between two low-quality producers is always possible. After the merger of two firms consumer surplus always decreases, but welfare sometimes increases. However, the total surplus for the merging firms is higher when a high-quality producer merges with a low-quality producer. We also consider the endogenous merger selection process and show that i) if the quality difference (net of cost) is very high, then the high-quality producer will merge with a low-quality producer and ii) if the quality difference (net of cost) is very low, then the high-quality producer will bribe the low-quality producers to merge. Interestingly, we show that if the quality difference (net of cost) is moderate, then the high-quality producer a) will bribe other firms to merge if it has high bargaining power in the merger negotiation process; b) otherwise will use the profit-sharing scheme and merge with a low-quality producer.

(With Uday Bhanu Sinha and PV Vaishnav

To register for this event please visit the following URL: https://us06web.zoom.us/meeting/register/tZIpdumhrTgtG9x-MMhp9eSPfLeOkTD8nlVM →

Date & Time

26-09-2024
11:30 AM
to 01:00 PM (IST)

Location

IEG

Venue

V.K.R.V Rao Room

Event Type

IEG Seminar

Event Category

Past event

Speaker(s)

Neelanjan Sen

Madras School of Economics

Moderator(s)

Sukhdeep Singh

Assistant Professor