Merger, Ease of Entry, and Entry Deterrence in a Dynamic Model

Posted: 2 Aug 2006

See all articles by Anthony M. Marino

Anthony M. Marino

University of Southern California - Marshall School of Business

Jan Zabojnik

Queen's University - Department of Economics

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Abstract

We analyze whether ease and speed of entry can mitigate the anti-competititve effects of a merger, in a dynamic model of endogenous merger. In our model, if new firms can enter quickly, it is more likely that merger is motivated by efficiency as opposed to increased market power. Thus, there is less reason to challenge the merger. On the other hand, if entry of new firms becomes less costly, firms may have a stronger incentive to monopolize the industry through horizontal merger. We also show that when the incumbent can engage in entry deterrence activities, anti-merger policy can decrease welfare.

Keywords: Horizontal Mergers, Entry Deterrence

JEL Classification: K21, L41

Suggested Citation

Marino, Anthony M. and Zabojnik, Jan, Merger, Ease of Entry, and Entry Deterrence in a Dynamic Model. Journal of Industrial Economics, Forthcoming; USC CLEO Research Paper No. C03-3; Marshall School of Business Working Paper No. FBE 06.06. Available at SSRN: https://ssrn.com/abstract=921621 or http://dx.doi.org/10.2139/ssrn.398080

Anthony M. Marino (Contact Author)

University of Southern California - Marshall School of Business ( email )

Dept. of Finance & Business Economics
Los Angeles, CA 90089
United States
213-740-6525 (Phone)
213-740-6650 (Fax)

Jan Zabojnik

Queen's University - Department of Economics ( email )

94 University Avenue
Kingston, Ontario K7L 3N6
Canada
613-533-2275 (Phone)
613-533-6668 (Fax)

HOME PAGE: http://qed.econ.queensu.ca/faculty/zabojnik/Page/

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