Merger Externalities in Oligopolistic Markets
40 Pages Posted: 11 Jul 2013 Last revised: 27 Aug 2014
Date Written: August 12, 2014
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: Suggested Citation