Welfare-Reducing Mergers in Differentiated Oligopolies with Free Entry

7 Pages Posted: 4 Jun 2010

See all articles by Nisvan Erkal

Nisvan Erkal

University of Melbourne - Faculty of Business and Economics

Daniel Piccinin

Brick Court Chambers

Date Written: November 10, 2009

Abstract

Antitrust authorities regard the possibility of post-merger entry and merger-generated efficiencies as two factors that may counteract the negative effects of horizontal mergers. This article shows that in differentiated oligopolies with linear demand, all entry-inducing mergers harm consumer welfare. This is because if there is entry following a merger, it implies that the merger-generated efficiencies were not sufficiently large. Mergers which induce exit, owing to sufficiently high cost savings, always improve consumer welfare.

Suggested Citation

Erkal, Nisvan and Piccinin, Daniel, Welfare-Reducing Mergers in Differentiated Oligopolies with Free Entry (November 10, 2009). Economic Record, Vol. 86, No. 273, pp. 178-184, June 2010, Available at SSRN: https://ssrn.com/abstract=1615782 or http://dx.doi.org/10.1111/j.1475-4932.2009.00612.x

Nisvan Erkal (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia
+61 3 8344 3307 (Phone)
+61 3 8344 6899 (Fax)

HOME PAGE: http://www.nisvanerkal.net

Daniel Piccinin

Brick Court Chambers ( email )

7 - 8 Essex St.
London, WC2R 3LD
United Kingdom

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