Mergers, Entry, and Consumer Welfare

61 Pages Posted: 8 Mar 2020 Last revised: 30 Jul 2021

See all articles by Peter Caradonna

Peter Caradonna

affiliation not provided to SSRN

Nathan Miller

Georgetown University - Robert Emmett McDonough School of Business

Gloria Sheu

Board of Governors of the Federal Reserve System

Date Written: July 30, 2021

Abstract

We analyze mergers and entry in differentiated-products oligopoly models of price competition. Under logit or constant elasticity of substitution demands, entry that restores pre-merger consumer surplus renders merger unprofitable. Thus, by revealed preference, it can be appropriate to infer entry barriers in merger review. The result extends to nested and random coefficients demand systems unless the entrant is a substantially distant competitor of the merging firms. We develop modeling frameworks to guide empirical analysis when theory is not dispositive. Applying these to the T-Mobile/Sprint merger, we find that the Court may have erred in treating DISH as a merger-induced entrant.

Keywords: mergers, entry, repositioning, antitrust

JEL Classification: K21, L13, L41

Suggested Citation

Caradonna, Peter and Miller, Nathan and Sheu, Gloria, Mergers, Entry, and Consumer Welfare (July 30, 2021). Georgetown McDonough School of Business Research Paper No. 3537135, Available at SSRN: https://ssrn.com/abstract=3537135 or http://dx.doi.org/10.2139/ssrn.3537135

Peter Caradonna

affiliation not provided to SSRN

Nathan Miller (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Gloria Sheu

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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