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Competition effects of mergers: An event study of the German electricity market

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Listed author(s):
  • Keller, Andreas

Abstract

This paper investigates the competition effects of the entry of Vattenfall into the German electricity market. While the competition authorities supported the entry by approving Vattenfall's acquisition of three regional utilities, other market participants raised concerns over the emergence of an upcoming oligopoly in the German market for power generation. We contrast the efficiency hypothesis postulating pro-competitive effects of mergers with the market power hypothesis postulating anti-competitive effects. For the analysis of the two opposing hypotheses, we use an event study approach to the stock prices of Vattenfall's competitors in the German market. While we find no empirical evidence for increased market power in the German electricity market due to Vattenfall's mergers, there is some indication for efficiency increases. We therefore cannot oppose the view of the competition authorities predicting an overall positive effect for consumers as a result of Vattenfall's entry into the German electricity market.

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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 38 (2010)
Issue (Month): 9 (September)
Pages: 5264-5271

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Handle: RePEc:eee:enepol:v:38:y:2010:i:9:p:5264-5271
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

Keywords: Electricity market Event study Horizontal merger;

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  1. McAfee, R. Preston & Williams, Michael A., 1988. "Can event studies detect anticompetitive mergers?," Economics Letters, Elsevier, vol. 28(2), pages 199-203.
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  5. repec:cdl:ucsbec:13-89 is not listed on IDEAS
  6. Oberndorfer, Ulrich, 2009. "EU Emission Allowances and the stock market: Evidence from the electricity industry," Ecological Economics, Elsevier, vol. 68(4), pages 1116-1126, February.
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  14. 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 119-149, April.
  15. Ventosa, Mariano & Baillo, Alvaro & Ramos, Andres & Rivier, Michel, 2005. "Electricity market modeling trends," Energy Policy, Elsevier, vol. 33(7), pages 897-913, May.
  16. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  17. LeRoy, Stephen F, 1989. "Efficient Capital Markets and Martingales," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1583-1621, December.
  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. Nihat Aktas & Eric de Bodt & Richard Roll, 2007. "Is European M&A Regulation Protectionist?," Economic Journal, Royal Economic Society, vol. 117(522), pages 1096-1121, 07.
  20. Tomaso Duso & Damien J. Neven & Lars-Hendrik Röller, 2007. "The Political Economy of European Merger Control: Evidence using Stock Market Data," Journal of Law and Economics, University of Chicago Press, vol. 50, pages 455-489.
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Cited by:

  1. Mulder, Machiel & Schoonbeek, Lambert, 2013. "Decomposing changes in competition in the Dutch electricity market through the residual supply index," Energy Economics, Elsevier, vol. 39(C), pages 100-107.
  2. repec:dgr:rugsom:13003-eef is not listed on IDEAS
  3. Kamiński, Jacek, 2014. "A blocked takeover in the Polish power sector: A model-based analysis," Energy Policy, Elsevier, vol. 66(C), pages 42-52.
  4. Kishimoto, Jo & Goto, Mika & Inoue, Kotaro, 2017. "Do acquisitions by electric utility companies create value? Evidence from deregulated markets," Energy Policy, Elsevier, vol. 105(C), pages 212-224.
  5. Pompei, Fabrizio, 2013. "Heterogeneous effects of regulation on the efficiency of the electricity industry across European Union countries," Energy Economics, Elsevier, vol. 40(C), pages 569-585.
  6. Yoo, Kyungjin & Lee, Youah & Heo, Eunnyeong, 2013. "Economic effects by merger and acquisition types in the renewable energy sector: An event study approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 26(C), pages 694-701.

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