Tilburg Law and Economics Center

TILEC Seminar: Evgenia Motchenkova (VU Amsterdam)

Date: Time: 10:45 Location: M 1003

10:45-11:45, M 1003

Evgenia Motchenkova obtained a PhD in Economics at Tilburg University on a thesis entitled “Optimal Enforcement of Competition Law”. She is now affiliated as an Assistant Professor in Economics Department of the VU University Amsterdam. She is also a research fellow at the Tinbergen Institute and TILEC (Tilburg Law and Economics Center).

Her main research interests are Industrial Organization, Law and Economics, Collusion, Competition Policy and Regulation, Game Theory, and Dynamic Games.

Mergers and Innovation Portfolios

joint work with José Luis Moraga-González (Vrije Universiteit Amsterdam) and  Saish Nevrekar (Universidad Carlos III de Madrid)


This paper studies mergers in markets where firms invest in a portfolio of research projects of different profitability and social value. The portfolio nature of the investment problem brings about novel insights on the external effects of firms’ investments. The investment of a firm in one project imposes a negative business-stealing externality on the rival firms because it lowers the probability they win the innovation contest for that project; however, the investment of a firm in one project also exerts a positive business-giving externality on the rival firms because it increases the likelihood they win the contest for the alternative project. Merging firms internalize these positive and negative externalities they impose on each other. We show that when the project that is relatively more profitable for the firms is also the more appropriable, then a merger increases consumer welfare by reducing investment in the most profitable project and increasing investment in the alternative (less profitable) project. For the case of linear demand and constant marginal costs, the portfolio effect of mergers makes them consumer welfare improving. With constant elasticity of demand and constant marginal costs, a merger increases consumer welfare if the more profitable project corresponds to the market with the higher elasticity of demand. The portfolio effect of mergers may dominate the usual market power effects of mergers.