Welfare-Reducing Mergers in Differentiated Oligopolies with Free Entry
Antitrust authorities regard the possibility of post-merger entry and merger-generated efficiencies as two factors that may counteract the negative effects of horizontal mergers. This article shows that in differentiated oligopolies with linear demand, all entry-inducing mergers harm consumer welfare. This is because if there is entry following a merger, it implies that the merger-generated efficiencies were not sufficiently large. Mergers which induce exit, owing to sufficiently high cost savings, always improve consumer welfare. Copyright © 2009 The Economic Society of Australia.
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Volume (Year): 86 (2010)
Issue (Month): 273 (June)
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