Document de travail

Mergers and Demand-Enhancing Innovation

Marc Bourreau, Bruno Jullien et Yassine Lefouili

Résumé

We study the impact of horizontal mergers on the incentives of merging firms to invest in innovation. We provide a decomposition of this impact that clarifies the different mechanisms at work and the difference between demand-enhancing and cost-reducing innovation. Moreover, we derive sufficient conditions for a merger to either reduce or raise the merging firms' incentives to innovate, and show that the mere comparison of the price diversion ratio and the innovation diversion ratio can help screen mergers. We also uncover a useful connection between the level of production synergies induced by a merger and its impact on innovation.

Mots-clés

Horizontal Mergers; Innovation; Competition;

Codes JEL

  • D43: Oligopoly and Other Forms of Market Imperfection
  • L13: Oligopoly and Other Imperfect Markets
  • L40: General

Référence

Marc Bourreau, Bruno Jullien et Yassine Lefouili, « Mergers and Demand-Enhancing Innovation », TSE Working Paper, n° 18-907, mars 2018, révision avril 2021.

Voir aussi

Publié dans

TSE Working Paper, n° 18-907, mars 2018, révision avril 2021