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Anti- versus Pro-Competitive Mergers

In a framework where mergers are mutually excluding, I show that firms pursue anti- rather than (alternative) pro-competitive mergers. Potential outsiders to anti-competitive mergers refrain from pursuing pro-competitive mergers if the positive externalities from anti-competitive mergers are strong enough. Potential outsiders to pro-competitive mergers pursue anti-competitive mergers if the negative externalities from the pro-competitive mergers are strong enough. Potential participants in anti-competitive mergers are cheap targets due to the risk of becoming outsiders to pro-competitive mergers. Firms may even pursue an unprofitable and anti-competitive merger, when alternative mergers are profitable and pro-competitive.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 694.

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Length: 43 pages
Date of creation: 05 Feb 2007
Date of revision:
Handle: RePEc:hhs:iuiwop:0694
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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  1. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-26, March.
  2. Fridolfsson, Sven-Olof, 2007. "A Consumer Surplus Defense in Merger Control," Working Paper Series 686, Research Institute of Industrial Economics.
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