Spatial competition and merging incentives when firms produce complements

► We analyse merger incentives in a spatial competition model with complementarities. ► With only a two-firm merger the participants benefit more than any outsiders. ► This is due to the negative demand externality imposed on some of the outsiders. ► Subsequent mergers by these outsiders may alter the incentives for the first merger. ► If the number of firms is sufficiently large the disincentive to merge disappears.