IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

On efficiency, concentration and welfare

  • BOCCARD, Nicolas

The welfare impact of a merger involves the market power offense and the efficiency defense. Salant et al. (1983) show that mergers among symmetric firms are unprofitable except for monopolization. We characterize the limit to this merger paradox in a simple linear Cournot oligopoly with asymmetric costs. Farrell and Shapiro (1990) provide sufficient conditions for a profitable merger to increase welfare but leave open whether it exists. We characterize the degree of cost asymmetry making a merger both profitable and socially desirable. Comparing rationalization and synergy within the efficiency defense, we show that for most industry structures, a rationalization merger is more likely to be welfare enhancing but a synergy merger is more likely to be profitable.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2009_40.pdf
Download Restriction: no

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009040.

as
in new window

Length:
Date of creation: 01 May 2009
Date of revision:
Handle: RePEc:cor:louvco:2009040
Contact details of provider: Postal:
Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)

Phone: 32(10)474321
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Neary, J. Peter, 2004. "Cross-Border Mergers as Instruments of Comparative Advantage," Center for European, Governance and Economic Development Research Discussion Papers 34, University of Goettingen, Department of Economics.
  2. Motta, Massimo & Vasconcelos, Helder, 2005. "Efficiency gains and myopic antitrust authority in a dynamic merger game," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 777-801, December.
  3. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  4. Klaus Gugler & Ralph Siebert, 2007. "Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 645-659, November.
  5. Spector, David, 2002. "Horizontal mergers, entry, and efficiency defences," CEPREMAP Working Papers (Couverture Orange) 0206, CEPREMAP.
  6. Whinston, Michael D., 2007. "Antitrust Policy toward Horizontal Mergers," Handbook of Industrial Organization, Elsevier.
  7. Eric J. Bartelsman & Mark Doms, 2000. "Understanding productivity: lessons from longitudinal microdata," Finance and Economics Discussion Series 2000-19, Board of Governors of the Federal Reserve System (U.S.).
  8. Fevrier, Philippe & Linnemer, Laurent, 2004. "Idiosyncratic shocks in an asymmetric Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 835-848, June.
  9. Steven Heubeck & Donald J. Smythe & Jingang Zhao, 2006. "A Note on the Welfare Effects of Horizontal Mergers in Asymmetric Linear Oligopolies," Annals of Economics and Finance, Society for AEF, vol. 7(1), pages 29-47, May.
  10. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  11. Klaus Gugler & Dennis C. Mueller & B. Burcin Yurtoglu & Christine Zulehner, 2001. "The Effects of Mergers: An International Comparison," CIG Working Papers FS IV 01-21, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  12. Huck, Steffen & Konrad, Kai A. & Müller, Wieland, 2001. "Profitable horizontal mergers without cost advantages: The role of internal organization, information, and market structure," Discussion Papers, various Research Units FS IV 01-05, Social Science Research Center Berlin (WZB).
  13. Farrell, Joseph & Shapiro, Carl, 2000. "Scale Economies and Synergies in Horizontal Merger Analysis," Department of Economics, Working Paper Series qt96z174x1, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  14. Sam Peltzman, 1977. "The Gains and Losses From Industrial Concentration," NBER Working Papers 0163, National Bureau of Economic Research, Inc.
  15. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
  16. Levin, Dan, 1990. "Horizontal Mergers: The 50-Percent Benchmark," American Economic Review, American Economic Association, vol. 80(5), pages 1238-45, December.
  17. Pesendorfer, Martin, 2003. " Horizontal Mergers in the Paper Industry," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 495-515, Autumn.
  18. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
  19. Davidson, Carl & Mukherjee, Arijit, 2007. "Horizontal mergers with free entry," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 157-172, February.
  20. Hassan Benchekroun & Amrita Ray Chaudhuri, 2006. "Trade Liberalization and the Profitability of Mergers: a Global Analysis," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 941-957, November.
  21. William E. Kovacic & Carl Shapiro, 2000. "Antitrust Policy: A Century of Economic and Legal Thinking," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 43-60, Winter.
  22. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  23. Clarke, Roger & Davies, Stephen W, 1982. "Market Structure and Price-Cost Margins," Economica, London School of Economics and Political Science, vol. 49(195), pages 277-87, August.
  24. Cowling, Keith & Waterson, Michael, 1976. "Price-Cost Margins and Market Structure," Economica, London School of Economics and Political Science, vol. 43(171), pages 267-74, August.
  25. Banal-Estanol, Albert & Macho-Stadler, Ines & Seldeslachts, Jo, 2008. "Endogenous mergers and endogenous efficiency gains: The efficiency defence revisited," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 69-91, January.
  26. Lahiri, Sajal & Ono, Yoshiyasu, 1988. "Helping Minor Firms Reduces Welfare," Economic Journal, Royal Economic Society, vol. 98(393), pages 1199-1202, December.
  27. Daughety, Andrew F, 1990. "Beneficial Concentration," American Economic Review, American Economic Association, vol. 80(5), pages 1231-37, December.
  28. Morton I. Kamien & Israel Zang, 1990. "The Limits of Monopolization Through Acquisition," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 465-499.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2009040. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.