The Welfare Analysis Of Retailers' Horizontal Mergers Under Two-Sided Market

Foreign retailers' constantly pouring into the Chinese market and the emergence of online retailers have greatly impacted the traditional retailers.In order to improve the competitiveness and face the challenges,more and more retailers joined the waves of integrations and mergers.As the platform connecting suppliers and customers,retailers' profit pattern has changed from markon to providing services for suppliers and customers Suppliers and customers exist cross-group network externalities.However,most of the existing researches about horizontal mergers are based on the perspective of "one-sided market",which are not taking into account the cross-group network externalities between suppliers and customers.Therefore,it is not only a complement to the traditional theory of horizontal mergers,also make up the vacancies of two-sided market research to place retailers' horizontal mergers into the perspective of two-sided market.Moreover,it has profound significance for guiding retailers' making competitive strategies and governments' regulation policies.Based on retailers' characteristics of two-sided market,the paper constructs the Hotelling liner city model and expends the research objects to retailers,consumers and suppliers.Then it analyzes the welfare impacts on the three research objects and the social welfare.Mathematical research conclusions:(1)The retailers' pricing to suppliers and consumers is related to cross-group network externalities,and horizontal mergers make the asymmetric degree bigger;(2)The suppliers' multi-attributive characteristics make cross-group network externalities internalized,and retailers' profit has nothing to do with cross-group network externalities,but the horizontal mergers make its profits up;(3)The improvement of cross-group network externalities has positive effect on the bilateral customers' overall welfare and social welfare.Then,in order to justify the truth and effectiveness of the general conclusions,the paper analyzes the historical data to examine the welfare effects on the retailers,horizontal mergers under two-sided market by using the methods of Difference-in-Difference(DID)and Propensity Score Match(PSM).Empirical conclusions:(1)For the dominant party,horizontal mergers make its profit significantly increased;(2)Horizontal mergers make the cross-group network externalities significantly increased,which make the dominant party's sales significantly positive;(3)The slotting allowance is significantly improving after horizontal mergers,but it has no significant effect compared with companies which are not involved in mergers;(4)Horizontal mergers have negative influence to social welfare,but statistically insignificant,therefore retail enterprises need to strengthen the integration after mergers in management,enterprise culture and so on.