Should We Expect Merger Synergies To Be Passed Through to Consumers?

Andrew Sweeting, Mario Leccese and Xuezhen Tao

No 17059, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Methods used to predict post-merger outcomes assume that synergies are common knowledge and imply that synergies will be at least partially passed through to consumers, potentially offsetting anticompetitive merger effects. However, the common knowledge assumption is inconsistent with other features of the merger review process and its implications are potentially inconsistent with the evidence of merger retrospectives. We relax the assumption in a simple model of post-merger competition and show that strategic incentives can lead a merged firm to not pass through quite large synergies arising in both horizontal and vertical mergers.

Keywords: Oligopoly; Mergers; Asymmetric information; Pooling; Firm conduct; Pass-through (search for similar items in EconPapers)
JEL-codes: L1 L13 L4 (search for similar items in EconPapers)
Date: 2022-06
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