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Assessing horizontal mergers under uncertain efficiency gains

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  • Choné, Philippe
  • Linnemer, Laurent

Abstract

The analysis of horizontal mergers hinges on a tradeoff between unilateral effects and efficiency gains. We examine the role of uncertainty in this tradeoff. In theory, the attitude towards uncertainty depends on the curvature of the social objective function. On the one hand, adjustment effects, both on the consumers' and firms' sides, tend to make consumers' surplus and firms' profits convex. On the other hand, pass-through effects may act in the opposite direction. We show that convexity prevails in a number of situations, including the most general linear demand model. Implications for empirical merger analysis are exposed.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 26 (2008)
Issue (Month): 4 (July)
Pages: 913-929

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Handle: RePEc:eee:indorg:v:26:y:2008:i:4:p:913-929

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Web page: http://www.elsevier.com/locate/inca/505551

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Cited by:
  1. Ding, Wei & Fan, Cuihong & Wolfstetter, Elmar G., 2013. "Horizontal mergers with synergies: Cash vs. profit-share auctions," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 382-391.
  2. Licun Xue & Rabah Amir & Effrosyni Diamantoudi, 2004. "Merger Performance under Uncertain Efficiency Gains," Working Papers 2004.79, Fondazione Eni Enrico Mattei.
  3. Le Pape, Nicolas & Zhao, Kai, 2013. "Horizontal mergers and uncertainty," Economics Discussion Papers 2013-62, Kiel Institute for the World Economy.
  4. Ben J. Heijdra & Jenny Ligthart, 2006. "Fiscal Policy, Monopolistic Competition, and Finite Lives," CESifo Working Paper Series 1661, CESifo Group Munich.
  5. Emilie Dargaud, 2013. "Horizontal mergers, efficiency gains and remedies," European Journal of Law and Economics, Springer, vol. 36(2), pages 349-372, October.

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