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

27 Pages Posted: 4 Sep 2006

See all articles by Anthony M. Marino

Anthony M. Marino

University of Southern California - Marshall School of Business

Jan Zabojnik

University of Southern California - Marshall School of Business

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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.

Suggested Citation

Marino, Anthony M. and Zabojnik, Jan, Merger, Ease of Entry and Entry Deterrence in a Dynamic Model. Journal of Industrial Economics, Vol. 54, No. 3, pp. 397-423, September 2006. Available at SSRN: https://ssrn.com/abstract=928032 or http://dx.doi.org/10.1111/j.1467-6451.2006.00294.x

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

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

701 Exposition Blvd
Los Angeles, CA 90089
United States

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