Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers
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 anti-competitive 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 identify competitive effects and thus the welfare consequences for consumers. Copyright (c) The London School of Economics and Political Science 2009.
Year of publication: |
2010
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Authors: | FRIDOLFSSON, SVEN-OLOF ; STENNEK, JOHAN |
Published in: |
Economica. - London School of Economics (LSE). - Vol. 77.2010, 308, p. 734-750
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Publisher: |
London School of Economics (LSE) |
Saved in:
freely available
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