Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Tuesday, December 15, 2009

Static and Dynamic Merger Effects: Evidence from the Divestiture of Texaco's Canadian Assets

Posted by D. Daniel Sokol

Mikko Packalen, University of Waterloo - Department of Economics and Anindya Sen, University of Waterloo - Department of Economics examine Static and Dynamic Merger Effects: Evidence from the Divestiture of Texaco's Canadian Assets.

ABSTRACT: Dynamic merger effects from potential efficiencies created by mergers are a core concept in standard merger theory and merger policy. While these efficiencies will likely arrive mostly in the long run, empirical merger analyses have generally focused on short-run effects. We estimate merger effects from the divestiture of Texaco's Canadian assets. Our main emphasis is on estimating short and long-run merger impacts on market shares. Standard merger theory predicts that merger efficiencies will be reflected in market shares: the presence of merger efficiencies determines whether the merged firm regains market share in the long run. Results from two difference-in-difference specifications show that the short-run merger impact on the merging firms' combined market share was small but in the long run the merged firm experienced a large decline in its market share. These results demonstrate both that dynamic merger effects can be important, and that dynamic merger effects do not necessarily arise from efficiencies created by a merger.

http://lawprofessors.typepad.com/antitrustprof_blog/2009/12/static-and-dynamic-merger-effects-evidence-from-the-divestiture-of-texacos-canadian-assets.html

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