Yassine Lefouili, Assistant Professor, Toulouse School of Economics
This paper studies the impact of horizontal mergers on firms’ incentives to invest in demand enhancing innovation. In our symmetric baseline model, we identify four effects of a merger on innovation: the innovation diversion effect, the margin expansion effect, the demand expansion effect and the per unit return to innovation effect. The first two effects are negative, while the third one is positive, and the fourth one can be either positive or negative. We offer sufficient conditions for a merger to reduce or raise incentives to innovate in the absence of spill overs and synergies, and provide commonly used models in which they hold. Finally, we show that our approach can be extended to account for spill overs, synergies in R&D, synergies in production and asymmetric demand and cost functions.
Yassine Lefouili is an Assistant Professor at the Toulouse School of Economics and the Director of the TSE Digital Center. His main research fields are industrial organisation, competition policy, digital economics, and the law and economics of intellectual property. His research has been published in the RAND Journal of Economics, Games and Economic Behavior, the Journal of Industrial Economics, the International Journal of Industrial Organization, and the Journal of Economics and Management Strategy, among others.