Quality differentiation and merger of complement f irms
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    Abstract:

    This paper introduces a demand function with quality parameter and consumer’s quality preference pa2 rameter from the point of product differentiation , and analyses the causes that the merger of firms of complementary products can improve the quality of the composite of complementary products. It also analyses the incentives of merg2 ing firms with complementary products and the market changes after the merger. A conclusion is drawn that under certain quality condition , firms with complementary products have the incentive to merge , which can explain mergers of firms of complementary products in nowadays merging wave.

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