Efficiency-enhancing horizontal mergers in spatial competition

This paper shows that a horizontal merger between two stores (or firms) that are relatively close can enhance efficiency in a model of spatial competition (or spatial product differentiation), if the spacing between them (or between their products) is relatively small compared to the spacing between other stores (or firms) in the market. The basic model assumes that consumers with completely inelastic demand are spread along an infinite line that has infinitely many stores (or firms), but cases with different assumptions are also considered.