Advanced Search
MyIDEAS: Login

Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers

Contents:

Author Info

  • Fridolfsson, Sven-Olof
  • Stennek, Johan

Abstract

There is diverging empirical evidence on the competitive effects of horizontal mergers: consumer prices (and thus presumably competitors' profits) often rise while competitors' share prices fall. Our model of endogenous mergers provides a possible reconciliation. It is demonstrated that anticompetitive mergers may reduce competitors' share prices, if the merger announcement informs the market that the competitors' lost a race to buy the target. Also the use of 'first rumour' as an event may create similar problems of interpretation. We also indicate how the event-study methodology may be adapted to identiy competitive effects and thus, the welfare consequences for consumers.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepr.org/pubs/dps/DP5977.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5977.

as in new window
Length:
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:cpr:ceprdp:5977

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: antitrust; coalition formation; event studies; in-play; mergers & acquisitions;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," Working Paper Series 515, Research Institute of Industrial Economics.
  2. 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.
  3. Horn, Henrik & Persson, Lars, 1996. "Endogenous Mergers in Concentrated Markets," CEPR Discussion Papers 1544, C.E.P.R. Discussion Papers.
  4. Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Fabozzi, Frank J, et al, 1988. " A Note on Unsuccessful Tender Offers and Stockholder Returns," Journal of Finance, American Finance Association, vol. 43(5), pages 1275-83, December.
  6. Fridolfsson S.O. & Stennek J., 1999. "Why mergers reduce profits, and raise share prices: A theory of preemptive mergers," Working Papers 1999018, University of Antwerp, Faculty of Applied Economics.
  7. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-52, December.
  8. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, vol. 80(2), pages 400-404, May.
  9. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  10. Morton I. Kamien & Israel Zang, 1987. "The Limits of Monopolization Through Acquisition," Discussion Papers 754, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Heckman, James J & Smith, Jeffrey A, 1999. "The Pre-programme Earnings Dip and the Determinants of Participation in a Social Programme. Implications for Simple Programme Evaluation Strategies," Economic Journal, Royal Economic Society, vol. 109(457), pages 313-48, July.
  12. Eckbo, B Espen & Maksimovic, Vojislav & Williams, Joseph, 1990. "Consistent Estimation of Cross-Sectional Models in Event Studies," Review of Financial Studies, Society for Financial Studies, vol. 3(3), pages 343-65.
  13. Damien Neven, 2002. "Discrepancies Between Markets and Regulators: an Analysis of the First ten Years of EU Merger Control," IHEID Working Papers 10-2002, Economics Section, The Graduate Institute of International Studies.
  14. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  15. Eckbo, B Espen & Wier, Peggy, 1985. "Antimerger Policy under the Hart-Scott-Rodino Act: A Reexamination of the Market Power Hypothesis," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 119-49, April.
  16. Mitchell, Mark L. & Mulherin, J. Harold, 1996. "The impact of industry shocks on takeover and restructuring activity," Journal of Financial Economics, Elsevier, vol. 41(2), pages 193-229, June.
  17. Mueller, Dennis C, 1985. "Mergers and Market Share," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 259-67, May.
  18. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
  19. McAfee, R. Preston & Williams, Michael A., 1988. "Can event studies detect anticompetitive mergers?," Economics Letters, Elsevier, vol. 28(2), pages 199-203.
  20. Boyan Jovanovic & Peter L. Rousseau, 2001. "Mergers and Technological Change: 1885-1998," Vanderbilt University Department of Economics Working Papers 0116, Vanderbilt University Department of Economics.
  21. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
  22. Ajeyo Banerjee & E. Woodrow Eckard, 1998. "Are Mega-Mergers Anticompetitive? Evidence from the First Great Merger Wave," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 803-827, Winter.
  23. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-69, June.
  24. Kamien, Morton I & Zang, Israel, 1993. "Monopolization by Sequential Acquisition," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 205-29, October.
  25. Singal, Vijay, 1996. "Airline Mergers and Competition: An Integration of Stock and Product Price Effects," The Journal of Business, University of Chicago Press, vol. 69(2), pages 233-68, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Joseph A. Clougherty & Tomaso Duso, 2010. "Using Rival Effects to Identify Synergies and Improve Merger Typologies," CIG Working Papers SP II 2010-13, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  2. Patrice Bougette & Florent Venayre, 2008. "Contrôles a priori et a posteriori des concentrations : comment augmenter l'efficacité des politiques de concurrence," Revue d'économie industrielle, De Boeck Université, vol. 0(1), pages 9-40.
  3. Tomaso Duso & Klaus Gugler & Florian Szücs, 2013. "An Empirical Assessment of the 2004 EU Merger Policy Reform," Economic Journal, Royal Economic Society, vol. 123(11), pages F596-F619, November.
  4. Angelov, Nikolay, 2006. "Modelling firm mergers as a roommate problem," Working Paper Series 2006:10, Uppsala University, Department of Economics.
  5. Oliver Budzinski, 2011. "Impact Evaluation of Merger Decisions," Working Papers 112/11, University of Southern Denmark, Department of Environmental and Business Economics.
  6. Mats Bergman, 2008. "Quis Custodiet Ipsos Custodes? or Measuring and Evaluating the Effectiveness of Competition Enforcement," De Economist, Springer, vol. 156(4), pages 387-409, December.
  7. Budzinski, Oliver, 2012. "Empirische Ex-Post Evaluation von wettbewerbspolitischen Entscheidungen: Methodische Anmerkungen," Ilmenau Economics Discussion Papers 69, Ilmenau University of Technology, Institute of Economics.
  8. Fridolfsson, Sven-Olof & Stennek, Johan, 2005. "Hold-up of anti-competitive mergers," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 753-775, December.
  9. Patrice Bougette & Florent Venayre, 2008. "Contrôles a priori et a posteriori des concentrations : comment augmenter l'efficacité des politiques de concurrence ?," Working Papers 245031, Institut National de la Recherche Agronomique, France.
  10. Budzinski, Oliver, 2012. "Impact evaluation of merger control decisions," Ilmenau Economics Discussion Papers 75, Ilmenau University of Technology, Institute of Economics.
  11. Keller, Andreas, 2010. "Competition effects of mergers: An event study of the German electricity market," Energy Policy, Elsevier, vol. 38(9), pages 5264-5271, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5977. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.