Antitrust & Competition Policy Blog

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

Thursday, August 22, 2013

Merger Externalities in Oligopolistic Markets

Posted by D. Daniel Sokol

Klaus Peter Gugler, Vienna University of Economics and Business Administration; European Corporate Governance Institute (ECGI) and Florian Szucs, German Institute for Economic Research (DIW Berlin) Merger Externalities in Oligopolistic Markets explain 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.

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