Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers

Sven-Olof Fridolfsson and Johan Stennek

Economica, 2010, vol. 77, issue 308, 734-750

Abstract: There is diverging empirical evidence on the competitive effects of horizontal mergers: consumer prices (and thus presumably competitors' profits) often rise while competitors' share prices fall. Our model of endogenous mergers provides a possible reconciliation. It is demonstrated that anti‐competitive mergers may reduce competitors' share prices, if the merger announcement informs the market that the competitors lost a race to buy the target. Also the use of ‘first rumour’ as an event may create similar problems of interpretation. We also indicate how the event‐study methodology may be adapted to identify competitive effects and thus the welfare consequences for consumers.

Date: 2010
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https://doi.org/10.1111/j.1468-0335.2009.00795.x

Related works:
Working Paper: Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers (2006)
Working Paper: Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers (2006)
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