Compatible Mergers: Assets, ServiceAreas, and Market Power
Ken Onishi and
No 19-007E, CIGS Working Paper Series from The Canon Institute for Global Studies
This paper empirically examines the discrepancy between the incentive of ﬁrms to merge and the social value of mergers using detailed data on merger waves in the pre-WWII Japanese electricity industry when a competition authority did not yet exist. We ﬁnd that ﬁrms could enjoy cost synergies when merging with ﬁrms with greater diﬀerences in production asset composition and/or reachable customers. Such mergers resulted in increases in capital utilization and total output. However, the sources of these cost synergies did not aﬀect the merger decision of ﬁrms; instead, geographical proximity increased the likelihood of mergers. These results imply that the merger incentive may not align with social welfare and thus policy intervention to allow selective mergers for particular combinations of ﬁrms may help increase social welfare.
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Working Paper: Compatible Mergers: Assets, Service Areas, and Market Power (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cnn:wpaper:19-007e
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