Mergers Boost Welfare When Products Are Closer Substitutes
The article explores the impact of mergers between different companies that sell similar products. It shows that when these companies compete by selling a lot of products, a merger can be good for everyone if the costs are not too different. However, if they compete by setting prices, mergers are never good for the overall welfare. The closer the products are to each other, the wider the range of cost differences where a merger can be beneficial.