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Horizontal mergers and exit in declining industries

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Author Info
Darren Filson
Bunchon Songsamphant

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Abstract

Previous work on exit in declining industries has neglected mergers. This paper examines a simple model that illustrates how mergers can affect the order of exit. The model also predicts which declining industries experience horizontal mergers. Mergers are more likely if (1) the inverse demand curve is steep at high levels of output and flat at low levels of output; (2) the industry declines slowly early on and rapidly later on; and (3) market concentration is high. The conditions that make mergers privately profitable also tend to make them socially optimal.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

Volume (Year): 12 (2005)
Issue (Month): 2 (February)
Pages: 129-132
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Handle: RePEc:taf:apeclt:v:12:y:2005:i:2:p:129-132

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Baden-Fuller, Charles W F, 1989. "Exit from Declining Industries and the Case of Steel Castings," Economic Journal, Royal Economic Society, vol. 99(398), pages 949-61, December. [Downloadable!] (restricted)
  2. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. April Mitchell Franco & Darren Filson, 2000. "Knowledge diffusion through employee mobility," Staff Report 272, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  4. Filson, Darren, et al, 2001. "Market Power and Cartel Formation: Theory and an Empirical Test," Journal of Law & Economics, University of Chicago Press, vol. 44(2), pages 465-80, October.
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  5. Mary E. Deily, 1991. "Exit Strategies and Plant-Closing Decisions: The Case of Steel," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 250-263, Summer. [Downloadable!] (restricted)
  6. Dutz, Mark A., 1989. "Horizontal mergers in declining industries : Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 11-33, March. [Downloadable!] (restricted)
  7. Fudenberg, Drew & Tirole, Jean, 1986. "A Theory of Exit in Duopoly," Econometrica, Econometric Society, vol. 54(4), pages 943-60, July. [Downloadable!] (restricted)
  8. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter. [Downloadable!] (restricted)
  9. Ghemawat, Pankaj & Nalebuff, Barry, 1990. "The Devolution of Declining Industries," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 167-86, February. [Downloadable!] (restricted)
  10. Filson, Darren, 2002. "Product and process innovations in the life cycle of an industry," Journal of Economic Behavior & Organization, Elsevier, vol. 49(1), pages 97-112, September. [Downloadable!] (restricted)
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Cited by:
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  1. Mathias Erlei, 2006. "Small is Successful!?," TUC Working Papers in Economics 0005, Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal). [Downloadable!]
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