Horizontal Mergers, Entry and Efficiency Defences
19 Pages Posted: 6 Jun 2001
Date Written: May 2001
This paper addresses the effect of horizontal mergers on prices.
It is shown that if firms compete in quantities and marginal costs are nondecreasing, any profitable merger failing to generate technological synergies must harm consumers through higher prices, irrespective of entry conditions in the industry. However this result does not hold if products are differentiated and firms compete in prices. The implications for merger policy are discussed.
Keywords: Horizontal mergers, competition policy, oligopoly theory
JEL Classification: D43, K21, L13, L41
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