Investment Dynamics and Merger Policy: Long-run Effects of Horizontal Merger in Oligopolistic Market

Takeshi Fukasawa and Hiroshi Ohashi
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Takeshi Fukasawa: Waseda Institute for Advanced Study, Waseda University
Hiroshi Ohashi: Faculty of Economics, the University of Tokyo

No CIRJE-F-1264, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper evaluates long-run effects of a horizontal merger and its remedies in a capital-intensive industry. It estimates a dynamic oligopoly model with continuous investment, enabled by a computationally efficient simulation algorithm. A decomposition of investment incentives shows that static forces dominated dynamic considerations. The merger, despite raising prices, increased social welfare, primarily through efficiency gains. The analysis also finds that divestiture remedies had persistent effects lasting nearly two decades, and that optimal remedy design differs markedly depending on whether consumer or social welfare is used as the evaluative standard.

Pages: 49 pages
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2025cf1264

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