Profitable Horizontal Mergers Without Cost Advantages: The Role of Internal Organization, Information, and Market Structure

Huck, Steffen; Konrad, Kai A.; Müller, Wieland

doi:10.2139/ssrn.261147

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Profitable Horizontal Mergers Without Cost Advantages: The Role of Internal Organization, Information, and Market Structure

14 Pages Posted: 22 Feb 2001

See all articles by Steffen Huck

Steffen Huck

University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Wieland Müller

University of Vienna, Department of Economics & VCEE; Tilburg University, Department of Economics & CentER; Corvinus Institute for Advanced Studies (CIAS), Corvinus University of Budapest

Date Written: March 2001

Abstract

Merged firms are typically rather complex organisations. Accordingly, merger has a more profound effect on the structure of a market than simply reducing the number of competitors. We show that this may render horizontal mergers profitable and welfare-improving even if costs are linear. The driving force behind these results, which help to reconcile theory with various empirical findings, is the assumption that information about output decisions flows more freely within a merged firm.

Keywords: Merger, Organization, Information, Market Structure

JEL Classification: D21, D43, L13, L22

Suggested Citation: Suggested Citation

Huck, Steffen and Konrad, Kai A. and Müller, Wieland, Profitable Horizontal Mergers Without Cost Advantages: The Role of Internal Organization, Information, and Market Structure (March 2001). Available at SSRN: https://ssrn.com/abstract=261147 or http://dx.doi.org/10.2139/ssrn.261147