Merger, Ease of Entry, and Entry Deterrence in a Dynamic Model
Anthony M. Marino
University of Southern California - Marshall School of Business
Queen's University - Department of Economics
USC CLEO Research Paper No. C03-3
Marshall School of Business Working Paper No. FBE 06.06
We analyze whether ease and speed of entry can mitigate the anti-competititve effects of a merger, in a dynamic model of endogenous merger. In our model, if new firms can enter quickly, it is more likely that merger is motivated by efficiency as opposed to increased market power. Thus, there is less reason to challenge the merger. On the other hand, if entry of new firms becomes less costly, firms may have a stronger incentive to monopolize the industry through horizontal merger. We also show that when the incumbent can engage in entry deterrence activities, anti-merger policy can decrease welfare.
Number of Pages in PDF File: 40
Keywords: Horizontal Mergers, Entry Deterrence
JEL Classification: K21, L41working papers series
Date posted: May 6, 2003
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