Can consumer surplus decrease with merger efficiencies?

Duarte Brito and Helder Vasconcelos

Economics Letters, 2024, vol. 239, issue C

Abstract: This paper investigates the impact of mergers on consumer welfare within a Cournot model, considering mergers driven by anticipated efficiency gains and potential post-merger entry. In this framework, we demonstrate that: (i) modest efficiencies can make both merger and entry beneficial, benefiting consumers; (ii) moderate efficiencies may deter entry, harming consumers due to the merger; and (iii) significant efficiencies may discourage entry but lead to lower prices, benefiting consumers. This result, therefore, embodies an important policy implication that assessing the overall effect of a merger on consumer surplus requires evaluating merger-specific synergies alongside the likelihood of post-merger entry.

Keywords: Horizontal mergers; Entry; Synergies; Consumer surplus (search for similar items in EconPapers)
JEL-codes: L13 L41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:239:y:2024:i:c:s0165176524002155

DOI: 10.1016/j.econlet.2024.111732

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