Horizontal Mergers in the Paper Industry

Martin Pesendorfer

RAND Journal of Economics, 2003, vol. 34, issue 3, 495-515

Abstract: I examine mergers and acquisitions in the U.S. paper and paperboard industry, which experienced a wave of horizontal mergers during the mid-1980s. I describe how the mergers affected investment decisions, costs, and consumers, finding that merged firms lose market share and are more likely to scrap capacity subsequent to an acquisition. I estimate a cost function for individual firms based on an investment model, finding that the efficiency of the majority of acquiring firms increases following an acquisition. Using the estimated cost function, I quantify welfare effects and find evidence of total welfare increases in some paper product categories as a result of the mergers. Copyright 2003 by the RAND Corporation.

Date: 2003
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Working Paper: Horizontal Mergers in the Paper Industry (1998)
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