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Merger Externalities in Oligopolistic Markets

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  • Klaus Gugler
  • Florian Szücs

Abstract

We quantify externalities on profitability and market shares of competing firms in oligopolistic markets through the transition from an n to an n - 1 player oligopoly after a merger. Competitors are identified via the European Commission's market investigations and our methodology allows us to distinguish the externality due to the change in market structure from the merger effect. We obtain results consistent with the predictions of standard oligopoly models: rivals expand their output and increase their profits, whereas merging firms are negatively affected. This indicates that on average the market power effects of large mergers outweigh the efficiencies.

Suggested Citation

  • Klaus Gugler & Florian Szücs, 2013. "Merger Externalities in Oligopolistic Markets," Discussion Papers of DIW Berlin 1321, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1321
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    References listed on IDEAS

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    Cited by:

    1. Ralph Siebert, 2017. "Heterogeneous Merger Impacts on Competitive Outcomes," CESifo Working Paper Series 6607, CESifo Group Munich.
    2. repec:bla:manchs:v:87:y:2019:i:5:p:678-693 is not listed on IDEAS
    3. Haucap, Justus & Rasch, Alexander & Stiebale, Joel, 2019. "How mergers affect innovation: Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 283-325.
    4. Tsuyoshi Toshimitsu, 2019. "Analysis of Merger Control in a Network Products Market," Manchester School, University of Manchester, vol. 87(5), pages 678-693, September.
    5. Johannes Boehm & Jan Sonntag, 2018. "Vertical Integration and Foreclosure: Evidence from Production Network Data," Sciences Po publications 2018-12, Sciences Po.
    6. repec:eee:corfin:v:45:y:2017:i:c:p:467-479 is not listed on IDEAS
    7. Tsuyoshi Toshimitsu, 2017. "Merger Paradox in a Network Product Market: A Horizontally Differentiated Three-Firm Model," Discussion Paper Series 167, School of Economics, Kwansei Gakuin University, revised Sep 2017.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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