Mergers and Rivals' Mark-ups: Evidence from European Paper Manufacturers
AbstractThis paper investigates the effect of merger-driven market concentration on the mark-ups of non-merging rival firms in Europe's paper manufacturing industry. Using a representative data set of 400 independently-owned companies spanning a ten-year period, we aim to disentangle the impact of full-scale mergers and acquisitions from that due to other concentration-increasing developments. We find a positive and statistically significant relationship between price-cost margins and overall industry consolidation, as captured by the Herfindahl-Hirschman and four-firm indexes. However, takeover-related market share amalgamation has a negative impact, albeit of more modest proportions. The latter result seems to be driven by vertical transactions, suggesting that input-side channels, much as product price competition, may explain non-merging firms' mark-up response.
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Bibliographic InfoPaper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 21-2007.
Date of creation: 16 Sep 2007
Date of revision:
Mergers and acquisitions; Concentration; Mark-up; Competition policy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-03 (All new papers)
- NEP-BEC-2007-11-03 (Business Economics)
- NEP-COM-2007-11-03 (Industrial Competition)
- NEP-CSE-2007-11-03 (Economics of Strategic Management)
- NEP-IND-2007-11-03 (Industrial Organization)
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