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Merger Externalities in Oligopolistic Markets

40 Pages Posted: 11 Jul 2013 Last revised: 27 Aug 2014

Klaus Peter Gugler

Vienna University of Economics and Business; European Corporate Governance Institute (ECGI)

Florian Szücs

Vienna University of Economics and Business

Date Written: August 12, 2014

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.

Keywords: oligopolistic competition, rivals, mergers, externalities

JEL Classification: L13, L40, G34

Suggested Citation

Gugler, Klaus Peter and Szücs, Florian, Merger Externalities in Oligopolistic Markets (August 12, 2014). DIW Berlin Discussion Paper No. 1321. Available at SSRN: https://ssrn.com/abstract=2292106 or http://dx.doi.org/10.2139/ssrn.2292106

Klaus Gugler

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

HOME PAGE: http://www.wu.ac.at/iqv/mitarbeiter/gugler

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Florian Szücs (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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