Sequential mergers under general symmetric product differentiation with four firms

This paper studies the types of sequential mergers that emerge and how they emerge when goods produced by firms in an industry are differentiated. In particular, we employ the most general differentiation setting with four firms by introducing a new parameter describing the highest degree of differentiation. We analyze how the degree of product differentiation affects the emergence of sequential mergers and find that when the value of this new parameter decreases, sequential mergers are more likely to emerge. Furthermore, we also provide welfare and numerical analyses to discuss the product differentiation ranges that would or would not lead to sequential mergers or no mergers in equilibrium. Consequently, policymakers can use this new parameter as a rule-of-thumb parameter in predicting the future merger structure.