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The Gains From Merger Or Collusion In Product Differentiated Industries, Jonathan Baker, Timothy Bresnahan

Articles in Law Reviews & Other Academic Journals

A merger in an industry with differentiated products increases the market power of the merging firms to the extent that their products are close substitutes and that other firms produce only more distant substitutes.' Such a merger makes the residual demand curve of each partner steeper, by shifting each in the direction of the industry demand curve. The extent of this increase in market power depends upon the own-elasticity of demand for each merging firm's product, as well as the cross-elasticity of demand for each with all other firms' products. As a result, evaluating the effect of a merger between …