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Horizontal Mergers Without Synergies May Increase Consumer Welfare

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  • Stennek Johan

    (IUI and CEPR)

Abstract

In imperfectly competitive markets firms with high costs produce positive output. The market's ability to minimize costs is also constrained by the fact that firms' costs are often private information. Mergers in such markets play a dual role. They reduce competition but they also generate an efficiency gain associated with the pooling of information. This paper shows that not only may costs be reduced as a result of merger, the price level may also decline and consumers may thus gain.

Suggested Citation

  • Stennek Johan, 2003. "Horizontal Mergers Without Synergies May Increase Consumer Welfare," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-14, January.
    • Handle: RePEc:bpj:bejeap:v:topics.3:y:2003:i:1:n:2
    DOI: 10.2202/1538-0653.1074
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    References listed on IDEAS

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    1. Janice Ballou & Matthew Mishkind & Geraldine Mooney & Welmoet van Kammen, "undated". "National Science Foundation Report on Efficiency of Grant Size and Duration: Principal Investigator FY 2001 Grant Award Survey and Institutional Survey," Mathematica Policy Research Reports bdadbcef4daf4bf8b94a0fb7f, Mathematica Policy Research.
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    Cited by:

    1. Shieh Shiou & Huang Chi-Fei & Chen Hsiao-Chi, 2013. "Can Horizontal Mergers Without Synergies Increase Consumer Welfare? Cournot and Bertrand Competition Under Uncertain Demand," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(1), pages 453-484, April.
    2. Marco Pagnozzi & Antonio Rosato, 2014. "Entry by Takeover: Auctions vs. Negotiations," CSEF Working Papers 353, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Harrington, Joseph E., 2021. "There may be no pass through of a merger-related cost efficiency," Economics Letters, Elsevier, vol. 208(C).
    4. Luis Gautier & Mahelet G. Fikru, 2024. "Welfare Impact of New Firm Acquisition," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 105-132, Springer.
    5. Banal-Estanol, Albert, 2007. "Information-sharing implications of horizontal mergers," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 31-49, February.
    6. Tuinstra Jan & in ’t Veld Daan L., 2014. "Market-Induced Rationalization and Welfare-Enhancing Cartels," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(1), pages 189-202, January.
    7. Charles J. Thomas, 2021. "Profitable Horizontal Mergers Without Efficiencies Can Increase Consumer Surplus," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 730-741, September.
    8. Tuinstra Jan & in ’t Veld Daan L., 2013. "Market-Induced Rationalization and Welfare-Enhancing Cartels," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(1), pages 189-202, October.
    9. Kojun Hamada, 2012. "Uncertainty and Horizontal Mergers," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 252-265, June.
    10. Pagnozzi, Marco & Rosato, Antonio, 2016. "Entry by takeover: Auctions vs. bilateral negotiations," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 68-84.
    11. Bakaouka, Elpiniki & Escrihuela-Villar, Marc & Ferrarese, Walter, 2024. "Horizontal mergers with Bertrand competition and convex costs," Mathematical Social Sciences, Elsevier, vol. 128(C), pages 60-67.
    12. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers 527, Universidade do Porto, Faculdade de Economia do Porto.

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