Welfare?Reducing Mergers in Differentiated Oligopolies with Free Entry

Nisvan Erkal & Daniel Piccinin
Authors registered in the RePEc Author Service: Nisvan Erkal

No 1081, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: Antitrust authorities regard the possibility of post-merger entry and merger-generated efficiencies as two factors that may counteract the negative effects of horizontal mergers. This paper shows that in differentiated oligopolies with linear demand, all entry-inducing mergers harm consumer welfare. This is because if there is entry following a merger, it implies that the merger-generated efficiencies were not sufficiently large. Mergers which induce exit, due to sufficiently high cost savings, always improve consumer welfare.

Keywords: Horizontal mergers; product differentiation; entry; cost efficiencies; antitrust policy (search for similar items in EconPapers)
JEL-codes: K21 L13 L22 L41 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2009
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Journal Article: Welfare‐Reducing Mergers in Differentiated Oligopolies with Free Entry (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:1081

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