Working paper

Mergers and Investments in New Products

Bruno Jullien, and Yassine Lefouili

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

Reference

Bruno Jullien, and Yassine Lefouili, Mergers and Investments in New Products, TSE Working Paper, n. 18-949, August 2018.

See also

Published in

TSE Working Paper, n. 18-949, August 2018