Working paper

A Theory of Conglomerate Mergers

Zhijun Chen, and Patrick Rey


We present a theory of conglomerate mergers and explore the effect of portfolio differentiation due to the heterogeneity of consumption synergy derived from product bundling. The differentiation of product portfolios reduces competition and leads to higher prices for stand- alone products in highly concentrated markets. As a result, conglomerate mergers benefit consumers who purchase bundled products from the merged entity but can harm those who prefer to mix-and-match standalone products. We demonstrate that a conglomerate merger increases total consumer surplus if the merged firm continues to sell standalone products, but it can be detrimental to consumers if the firm commits to pure bundling. Our analysis provides important policy implications for assessing conglomerate merger cases.


Conglomerate mergers; Portfolio differentiation; Bundling;


Zhijun Chen, and Patrick Rey, A Theory of Conglomerate Mergers, TSE Working Paper, n. 23-1447, June 2023.

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TSE Working Paper, n. 23-1447, June 2023