Abstract

http://ssrn.com/abstract=955338
 
 

Citations (4)



 


 



Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers


Sven-Olof Fridolfsson


Research Institute of Industrial Economics (IFN)

Johan Stennek


Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

December 2006

CEPR Discussion Paper No. 5977

Abstract:     
There is diverging empirical evidence on the competitive effects of horizontal mergers: consumer prices (and thus presumably competitors' profits) often rise while competitors' share prices fall. Our model of endogenous mergers provides a possible reconciliation. It is demonstrated that anticompetitive mergers may reduce competitors' share prices, if the merger announcement informs the market that the competitors' lost a race to buy the target. Also the use of 'first rumour' as an event may create similar problems of interpretation. We also indicate how the event-study methodology may be adapted to identiy competitive effects and thus, the welfare consequences for consumers.

Number of Pages in PDF File: 47

Keywords: Mergers & acquisitions, event studies, antitrust, in-play, coalition formation

JEL Classification: G14, G34, L12, L41

working papers series





Date posted: January 7, 2007  

Suggested Citation

Fridolfsson, Sven-Olof and Stennek, Johan, Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers (December 2006). CEPR Discussion Paper No. 5977. Available at SSRN: http://ssrn.com/abstract=955338

Contact Information

Sven-Olof Fridolfsson
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
Johan Stennek (Contact Author)
Research Institute of Industrial Economics (IFN) ( email )
P.O. Box 5501
S-114 85 Stockholm
Sweden
+46 8 665 4536 (Phone)
+46 8 665 4599 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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