Horizontal mergers and exit in declining industries

Darren Filson and Bunchon Songsamphant

Applied Economics Letters, 2005, vol. 12, issue 2, 129-132

Abstract: Previous work on exit in declining industries has neglected mergers. This paper examines a simple model that illustrates how mergers can affect the order of exit. The model also predicts which declining industries experience horizontal mergers. Mergers are more likely if (1) the inverse demand curve is steep at high levels of output and flat at low levels of output; (2) the industry declines slowly early on and rapidly later on; and (3) market concentration is high. The conditions that make mergers privately profitable also tend to make them socially optimal.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:12:y:2005:i:2:p:129-132

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DOI: 10.1080/1350485042000314334

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