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Socially Beneficial Mergers: A New Class of Concentration Indices

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Author Info
Nejat Anbarci () (Department of Economics, Florida International University)
Brett Katzman (Department of Economics and Finance, Kennesaw State University)

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Abstract

The prominent Herfindahl-Hirschman index (HHI), yields a higher concentration level in response to any merger between firms, implying that any merger will decrease the social welfare. Although HHI is used by the Anti-trust Division of the U.S. Department of Justice (AD-DoJ), its merger implications are not fully embraced by the anti-trust authorities. We propose a class of concentration indices that is in line with the spirit of the AD-DoJ’s merger policies and consider different theoretical models which indicate that the AD-DoJ is justified in allowing mergers especially among smaller firms, as they counter the market power of dominant firms.

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File URL: http://www.fiu.edu/orgs/economics/wp2005/05-04.pdf
File Format: application/pdf
File Function: First version, 2005
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Publisher Info
Paper provided by Florida International University, Department of Economics in its series Working Papers with number 0504.

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Length: 25 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:fiu:wpaper:0504

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Related research
Keywords: Horizontal Mergers; Industry Concentration; the Anti-Trust Division; Hirfindahl-Hirschman Index (HHI); Dominant Firm(s);

Find related papers by JEL classification:
L0 - Industrial Organization - - General

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References listed on IDEAS
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  1. Blackorby, Charles & Donaldson, David & Weymark, John A., 1982. "A normative approach to industrial-performance evaluation and concentration indices," European Economic Review, Elsevier, vol. 19(1), pages 89-121. [Downloadable!] (restricted)
  2. Ugur Akgün, 2004. "Mergers With Supply Functions," Journal of Industrial Economics, Blackwell Publishing, vol. 52(4), pages 535-546, December. [Downloadable!] (restricted)
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This page was last updated on 2009-11-3.


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