NDLI: R&D Investments Fostering Horizontal Mergers

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R&D Investments Fostering Horizontal Mergers

Content Provider	Scilit
Author	Cabolis, Christos Manasakis, Constantine Petrakis, Emmanuel
Copyright Year	2016
Description	Journal: SSRN Electronic Journal We study a homogenous good triopoly in which firms first choose their cost-reducing R&D investments and consider alternative merger proposals, and then compete a la Cournot in the ensuing industry. We identify conditions under which both horizontal mergers and non-integration are sustained by Coalition-Proof Nash equilibria (CPNE). These conditions involve the effectiveness of the R&D technology, as well as the distribution of the bargaining power between the acquirer and the acquiree, which determine the allocation of the incremental profits generated by the merger. We show that whether firms follow duplicative or complementary research paths, sustaining a merger generally requires a sufficiently effective R&D technology that creates endogenous cost asymmetries and renders the merger profitable, and a moderate distribution of bargaining power that allows to spread the benefits of the merger. We examine the welfare effects of mergers and obtain clear policy guidelines.
Related Links	https://e-archivo.uc3m.es/bitstream/10016/23280/1/we1609.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2803124
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.2803124
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2016-06-30
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Horizontal Mergers Cost-reducing Innovation Endogenous Efficiency Gains Coalition-proof Nash Equilibrium
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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