Tuesday, July 30, 2013
Posted by D. Daniel Sokol
Klaus Peter Gugler, Vienna University of Economics and Business Administration; European Corporate Governance Institute (ECGI) and Florian Szucs, DIW Berlin Merger Externalities in Oligopolistic Markets explore Merger Externalities in Oligopolistic Markets.
ABSTRACT: We quantify externalities on profitability and market shares of competing firms in oligopolistic markets through the transition from an n to an n-1 player oligopoly after a merger. Competitors are identified via the European Commission’s market investigations and our methodology allows us to distinguish the externality due to the change in market structure from the merger e ffect. We obtain results consistent with the predictions of standard oligopoly models: rivals expand their output and increase their profits, whereas merging firms are negatively aff ected. This indicates that on average the market power e ffects of large mergers outweigh the efficiencies.