Mergers, Entry, and Consumer Welfare

Peter Caradonna, Nathan H. Miller and Gloria Sheu

American Economic Journal: Microeconomics, 2025, vol. 17, issue 3, 103-30

Abstract: We model merger-induced entry in the context of differentiated-products price competition. We fully characterize the combinations of merger efficiencies and entrant qualities that can mitigate the adverse equilibrium welfare effects of an otherwise anticompetitive merger. The possibility of merger-induced entry introduces nonmonotonicity into the equilibrium value that consumers receive from merger efficiencies, potentially necessitating the joint analysis of efficiencies and entry in merger review. We also explicitly characterize the efficiencies required for merger-induced entrants to make profitable mergers consumer surplus neutral. We provide an empirical application to the T-Mobile/Sprint merger.

JEL-codes: G34 G38 K21 L13 L41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmic:v:17:y:2025:i:3:p:103-30

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DOI: 10.1257/mic.20240057

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