A New Perspective on Entry in Horizontal Merger Analysis

Thomas, Charles

A New Perspective on Entry in Horizontal Merger Analysis

Review of Industrial Organization, 2019, vol. 55, issue 3, No 6, 459-491

Abstract: Abstract I analyze horizontal mergers in procurement settings in which sellers incur costs to participate. Considering existing sellers’ contest-level entry differs from antitrust authorities’ typical emphasis on new sellers’ market-level entry to counteract a merger’s anticompetitive harm. I show that profitable mergers can increase consumer and total surplus by inducing more and stronger contest-level entry by the merged seller, which echoes common claims from merging parties that their merger is beneficial because it creates a stronger competitor. This finding suggests caution by antitrust authorities: when contest-level entry costs matter, standard models that ignore those costs prescribe blocking procompetitive mergers.

Keywords: Auctions; Efficiencies; Entry; Horizontal merger; Pricing; Procurement (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11151-019-09724-3

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