Strategic Buyers, Horizontal Mergers and Synergies: An Experimental Investigation*

Douglas Davis and Bart Wilson

No 601, Working Papers from VCU School of Business, Department of Economics

Abstract: This paper reports an experiment designed to evaluate interrelationships between strategic buyers, market power and merger-induced synergies. The experiment consists of 40 posted-offer quadropolies. Treatments include the use of simulated or human buyers, seller consolidations and merger-induced fixed cost and unit cost synergies. In the simulated-buyer markets we observe behavior generally consistent with comparative static predictions: prices rise post-merger, and unit (but not fixed) cost synergies may exert some price-moderating effect. The addition of powerful buyers changes results markedly. Although prices are lower in the human buyer markets, outcomes are more variable and predicted comparative static effects are no longer observed.

Pages: 37 pages
Date: 2006-01
New Economics Papers: this item is included in nep-com, nep-exp and nep-mic
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Strategic buyers, horizontal mergers and synergies: An experimental investigation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:vcu:wpaper:0601

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