Abstract:

In recent years， with the rapid development of the platform economy， the wave of mergers in the field of platforms has been widely concerned. Platforms such as those in ride hailing market and group buying market have been merged horizontally to make market structure more concentrated. There are two merge types in real cases. One is to keep the original two brands operating separately and the other is to retain one brand. Motivated by the observation， how the changes of merge type affect the economic effects of platform horizontal merger is investigated.In the two-sided markets， sellers are strongly affected by congestion effect besides positive indirect network effect. Fierce competition or conflicts among sellers within the same platform leads to reducing the willingness of sellers to access the platform， which is referred to as congestion effect. According to previous literature， most of the theoretical studies on the economic effects of platform horizontal merger focus on the impact of indirect network effect while how congestion effect affect these economic effects including price effects， profit effects and welfare effects is not clear. Introducing congestion effect among sellers， a Salop circular market model is developed for merger analysis. The effect of congestion effect on economic effects of platform horizontal merger under different merger types is analyzed. The following results are obtained.First， when only one brand is retained after merger， if congestion effect is strong and indirect network effect is weak， the pressure to reduce price is small and profit of platforms involved in the merger will be improved. When two brands are retained after merger， prices on the seller side will always increase and profit of platforms in the market will always be improved. If indirect network effect is strong， the pressure to reduce price on the buyer side is greater. Furthermore， the endogenous choice of merger type is determined by congestion effect and indirect network effect. In general， if congestion effect is strong， platforms tend to retain one brand. If indirect network effect is strong， platforms tend to retain two brands.Second， welfare analysis shows that indirect network effect improves welfare after merger while congestion effect tends to reduce welfare. From the perspective of sellers， welfare will always be reduced when two brands are retained after merger and horizontal merger of platforms may have a positive impact on welfare if indirect network effect is strong and congestion effect is weak when one brand is retained. From the perspective of buyers， if the indirect network effect is strong， buyers will be better after merger under both merger types. From the perspective of social efficiency， horizontal merger of platforms may have a positive impact on total social welfare if indirect network effect is strong and congestion effect is weak under both merger types. In addition， if the indirect network effect is strong enough， either the congestion effect is strong， or the congestion effect is small， but the indirect network effect is not particularly strong， the "see-saw" effect of improving welfare of buyers and reducing welfare of sellers will appear under both two merger types.Third， after extending the merger analysis to the network integration of platform horizontal merger， relevant result shows that network integration strengthens the impact of congestion effect and indirect network effect， and the greater the degree of network integration is， the more inclined the platform is to reduce prices after merger on both sides.

Key words: platform competition, horizontal merger, congestion effect, indirect network effect, network integration