Horizontal Mergers and Exit in Declining Industries
Previous work on exit in declining industries has neglected mergers. We examine a simple model that predicts which declining industries experience horizontal mergers. Mergers are more likely if 1) market concentration is high; 2) the inverse demand curve is steep at high levels of output and flat at low levels of output; and 3) the industry declines slowly early on and rapidly later on. The conditions that make mergers privately profitable also tend to make them socially optimal. We test the model using U.S. manufacturing industries that declined during 1975-1995 and find some empirical support.
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- Filson, Darren, et al, 2001.
"Market Power and Cartel Formation: Theory and an Empirical Test,"
Journal of Law and Economics,
University of Chicago Press, vol. 44(2), pages 465-480, October.
- Darren Filson & Edward Keen & Eric Fruits & Thomas E. Borcherding, "undated". "Market Power and Cartel Formation: Theory and an Empirical Test," Claremont Colleges Working Papers 2000-31, Claremont Colleges.
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- April Mitchell Franco & Darren Filson, 2000. "Knowledge Diffusion through Employee Mobility," Claremont Colleges Working Papers 2000-61, Claremont Colleges.
- April Franco & Darren Filson, 2000. "Knowledge diffusion through employee mobility," Staff Report 272, Federal Reserve Bank of Minneapolis.
- Mary E. Deily, 1991. "Exit Strategies and Plant-Closing Decisions: The Case of Steel," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 250-263, Summer.
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- King, Stephen P, 1998. "The Behaviour of Declining Industries," The Economic Record, The Economic Society of Australia, vol. 74(226), pages 217-230, September.
- Baden-Fuller, Charles W F, 1989. "Exit from Declining Industries and the Case of Steel Castings," Economic Journal, Royal Economic Society, vol. 99(398), pages 949-961, December.
- Dutz, Mark A., 1989. "Horizontal mergers in declining industries : Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 11-33, March.
- Filson, Darren, 2002. "Product and process innovations in the life cycle of an industry," Journal of Economic Behavior & Organization, Elsevier, vol. 49(1), pages 97-112, September.
- Darren Filson, "undated". "Product and Process Innovations in the Life Cycle of an Industry," Claremont Colleges Working Papers 2000-30, Claremont Colleges.
- Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter. Full references (including those not matched with items on IDEAS)
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