Mergers in Innovative Industries: The Role of Product Market Competition∗
نویسندگان
چکیده
We study how competition affects innovation (and welfare) when firms compete both in the product market and in innovation development. This relationship is complex and may lead to scenarios in which a lessening of competition increases R&D and consumer welfare in the long run, contradicting arguments provided by antitrust agencies in recent merger cases. We provide conditions for when a merger increases industry innovation and welfare, and when evaluating mergers based on static price effects is aligned with a fully dynamic merger evaluation. These conditions are based on properties of the product market payoffs. JEL: D43, L40, L51, O31, O34, O38
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