Horizontal Mergers, Entry and Efficiency Defences

Abstract

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