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The Impact of Horizontal Mergers on Market Structure: Evidence from the Semiconductor Industry

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  • Ralph Siebert

Abstract

The U.S. and EU Merger Guidelines strongly emphasize the relevance of the “ease of entry” argument in merger evaluations. Up to now, very little is known empirically about how mergers affect entry and exit, and the resulting number of firms in the markets. We empirically test this aspect of mergers using a comprehensive database that contains detailed firm-level information on mergers, production, and innovation in the dynamic random access memory semiconductor market from 1985 to 2004. Our reduced-form regression results show that mergers dominated by efficiency effects have a negative impact on the number of firms in the product market. Mergers dominated by market power effects result in a higher number of firms than efficiency dominated mergers. Interestingly, we also find that mergers foreclose potential entry in other product markets and reduce the number of firms in related product markets. Finally, our results confirm that postmerger changes in the equilibrium number of firms directly impact market prices.

Suggested Citation

  • Ralph Siebert, 2016. "The Impact of Horizontal Mergers on Market Structure: Evidence from the Semiconductor Industry," CESifo Working Paper Series 5911, CESifo.
    • Handle: RePEc:ces:ceswps:_5911
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    References listed on IDEAS

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    More about this item

    Keywords

    competitive effects; entry; foreclosure; horizontal mergers; market structure;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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