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Horizontal Mergers Without Synergies May Increase Consumer Welfare

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  • Stennek Johan

    () (IUI and CEPR)

Abstract

In imperfectly competitive markets firms with high costs produce positive output. The market's ability to minimize costs is also constrained by the fact that firms' costs are often private information. Mergers in such markets play a dual role. They reduce competition but they also generate an efficiency gain associated with the pooling of information. This paper shows that not only may costs be reduced as a result of merger, the price level may also decline and consumers may thus gain.

Suggested Citation

  • Stennek Johan, 2003. "Horizontal Mergers Without Synergies May Increase Consumer Welfare," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-14, January.
  • Handle: RePEc:bpj:bejeap:v:topics.3:y:2003:i:1:n:2
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    Citations

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    Cited by:

    1. Banal-Estanol, Albert, 2007. "Information-sharing implications of horizontal mergers," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 31-49, February.
    2. Kojun Hamada, 2012. "Uncertainty and Horizontal Mergers," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 252-265, June.
    3. Pagnozzi, Marco & Rosato, Antonio, 2016. "Entry by takeover: Auctions vs. bilateral negotiations," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 68-84.

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