47 Pages Posted: 7 Jan 2007
Date Written: December 2006
There is diverging empirical evidence on the competitive effects of horizontal mergers: consumer prices (and thus presumably competitors' profits) often rise while competitors' share prices fall. Our model of endogenous mergers provides a possible reconciliation. It is demonstrated that anticompetitive mergers may reduce competitors' share prices, if the merger announcement informs the market that the competitors' lost a race to buy the target. Also the use of 'first rumour' as an event may create similar problems of interpretation. We also indicate how the event-study methodology may be adapted to identiy competitive effects and thus, the welfare consequences for consumers.
Keywords: Mergers & acquisitions, event studies, antitrust, in-play, coalition formation
JEL Classification: G14, G34, L12, L41
Suggested Citation: Suggested Citation
Fridolfsson, Sven-Olof and Stennek, Johan, Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers (December 2006). CEPR Discussion Paper No. 5977. Available at SSRN: https://ssrn.com/abstract=955338
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