Seminar – An Aggregative Games Approach to Merger Analysis in Multiproduct Firm Oligopoly

Nicolas Schutz, Professor of Economics, University of Mannheim

Using an aggregative games approach, we analyse horizontal mergers in a model of multiproduct firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the oligopoly distortions to consumer surplus and aggregate surplus, and that the induced change in the naively computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer surplus based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.

Speaker bio

Nicolas Schutz is a Professor of Economics at the University of Mannheim and a Research Fellow at Centre for Economic Policy Research (CEPR). His research focuses on Industrial Organisation with an emphasis on issues related to oligopoly theory, horizontal mergers, market power in international markets, and vertical relations. His work has appeared in Econometrica, the Journal of Economic Theory, the Economic Journal, and the International Economic Review, among other academic journals. He holds an engineering degree from Ecole Polytechnique and a PhD from Paris School of Economics.