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Horizontal Mergers: An Equilibrium Analysis

Author

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  • Farrell, Joseph
  • Shapiro, Carl

Abstract

The authors analyze horizontal mergers in Cournot oligopoly. They find general conditions under which such mergers raise price, and show that any merger not creating synergies raises price. The authors develop a procedure for analyzing the effect of a merger on rivals and consumers and, thus, provide sufficient conditions for profitable mergers to raise welfare. They show that traditional merger analysis can be misleading in its use of the Herfindahl Index. Their analysis stresses the output responses of large firms not participating in the merger. Copyright 1990 by American Economic Association.
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Suggested Citation

  • Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  • Handle: RePEc:cdl:econwp:qt0tp305nx
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    References listed on IDEAS

    as
    1. Eichengreen, Barry & Sachs, Jeffrey, 1986. "Competitive devaluation and the Great Depression : A theoretical reassessment," Economics Letters, Elsevier, vol. 22(1), pages 67-71.
    2. Peter Temin, 1971. "The Beginning of the Depression in Germany," Economic History Review, Economic History Society, vol. 24(2), pages 240-248, May.
    3. Frenkel, Jacob A, 1974. "The Demand for International Reserves by Developed and Less-Developed Countries," Economica, London School of Economics and Political Science, vol. 41(161), pages 14-24, February.
    4. Eichengreen, Barry & Watson, Mark W & Grossman, Richard S, 1985. "Bank Rate Policy under the Interwar Gold Standard: A Dynamic Probit Model," Economic Journal, Royal Economic Society, vol. 95(379), pages 725-745, September.
    5. Fremling, Gertrud M, 1985. "Did the United States Transmit the Great Depression to the Rest of the World?," American Economic Review, American Economic Association, vol. 75(5), pages 1181-1185, December.
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