Munich Personal RePEc Archive

Horizontal mergers on platform markets: cost savings v. cross-group network effects?

Baranes, Edmond and Cortade, Thomas and Cosnita-Langlais, Andreea (2019): Horizontal mergers on platform markets: cost savings v. cross-group network effects?

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Abstract

We study the impact of cost savings on the outcome of horizontal mergers between two-sided platforms. We consider four symmetrically differentiated platforms located equidistantly on the unit circle and competing in membership fees. Users on both sides single-home, and we allow for both positive and negative cross-group externalities. We find that the impact of merger cost savings on prices is generally not monotonic, and that synergies are necessary for horizontal platform mergers to be Pareto-improving. Furthermore, the merger may benefit users on one side while harming users on the opposite side, which raises some interesting questions for the enforcement of merger control on two-sided markets.

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