CLIP of the month: A simple model of mergers and innovation

03.02.2020

This month’s CLIP is a short economic paper looking at how a merger affects incentives on the merging parties to innovate.  Whilst the model itself is stated to be simple, the headline conclusions are stark – mergers will tend to reduce innovation, with merging parties always reducing their innovation efforts post-merger and consumers are always worse off as a result.  Given a general increased focus on innovation in the course of merger reviews, if similar models were explored and adopted by competition authorities, it would be expected to give rise to increased scrutiny on the impacts of innovation arising from concentrations.

Stephen Smith

Author