Horizontal Mergers Without Synergies May Increase Consumer Welfare

Stennek Johan ()
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Stennek Johan: IUI and CEPR

The B.E. Journal of Economic Analysis & Policy, 2003, vol. 3, issue 1, 1-14

Abstract: In imperfectly competitive markets firms with high costs produce positive output. The market's ability to minimize costs is also constrained by the fact that firms' costs are often private information. Mergers in such markets play a dual role. They reduce competition but they also generate an efficiency gain associated with the pooling of information. This paper shows that not only may costs be reduced as a result of merger, the price level may also decline and consumers may thus gain.

Date: 2003
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DOI: 10.2202/1538-0653.1074

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