Horizontal mergers with free entry

Davidson, Carl; Mukherjee, Arijit

doi:10.1016/j.ijindorg.2006.03.003

Cited by 92 publications

(70 citation statements)

References 14 publications

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“…Further, in contrast to Schumpeter (1943), Farrell andShapiro (1990) and Davidson and Mukherjee (2007), we show that merger may benefit the consumers and increase social welfare even if there is no innovation, cost synergy and firm-entry.…”

Section: Introductioncontrasting

confidence: 99%

“…Our paper points towards a new factor, i.e., strategic tax/subsidy policy, for increasing the profitability of horizontal merger, thus complementing the previous works such as Perry and Porter (1985), Long and Vousden (1995), Kabiraj and Mukherjee (2001) and Davidson and Mukherjee (2007) showing the role of cost synergy, international trade cost, Stackelberg leader and firm-entry, respectively, in increasing the incentive for merger. Further, in contrast to Schumpeter (1943), Farrell andShapiro (1990) and Davidson and Mukherjee (2007), we show that merger may benefit the consumers and increase social welfare even if there is no innovation, cost synergy and firm-entry.…”

Section: Introductionsupporting

confidence: 77%

“…In a recent paper with no innovation, Davidson and Mukherjee (2007) show that merger may not affect consumers but increase social welfare for any synergic benefit in the presence of firm-entry. While synergic benefit, innovation and firm-entry are considered to be important factors for creating positive welfare effects of horizontal mergers, an important factor, viz., strategic tax policies, went unnoticed.…”

Section: Introductionmentioning

confidence: 97%

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Horizontal merger under strategic tax policy

2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We show that the presence of a strategic tax policy increases the incentive for a horizontal merger compared to the situation with no tax policy. Thus, we point towards a new factor, viz., strategic tax policy, for increasing the incentive for a horizontal merger that has been ignored in the existing literature. In contrast to the usual belief, we also show that a horizontal merger may benefit the consumers and the society. Terms of use: Documents in EconStor mayJEL-Code: L130, D430.

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Section: Introductioncontrasting

confidence: 99%

Section: Introductionsupporting

confidence: 77%

Section: Introductionmentioning

confidence: 97%

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Horizontal merger under strategic tax policy

2015

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“…Spector (2003) extends this work, establishing conditions under which, in the absence of efficiency gains, any profitable merger decreases welfare even if it does induce entry. In contrast, Cabral (2003) shows that with endogenous entry, the possibility of post-merger entry substantially improves the effect of a merger on consumer welfare, and Davidson and Mukherjee (2007) show that with endogenous entry, under certain conditions, all privately beneficial mergers are socially beneficial.…”

Section: Introductionmentioning

confidence: 99%

Buyer resistance for cartel versus merger

Kumar¹,

Marshall

Marx

et al. 2015

International Journal of Industrial Organization

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. buyers. We show that in a procurement setting with the potential for buyer resistance, the payoff to firms from forming a cartel exceeds that from merging. Thus, firms considering a merger may have an incentive to collude instead. We discuss implications for antitrust and merger policy. Terms of use: Documents in

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“…More recently, Pesendorfer (2005) considers the case where a merger may lead to additional mergers in the future; his results tend to oppose those of static models. The impact of potential entry on merger profitability is taken on by Werden and Froeb (1998), Spector (2003), and Davidson and Mukherjee (2007). Endogenous mergers are studied by Qiu and Zhou (2007) for rationalization and by Motta and Vasconcelos (2005) and Banal Estañol et al (2008) for synergies.…”

Section: Literaturementioning

confidence: 99%

On Efficiency, Concentration and Welfare

Boccard

2009

SSRN Journal

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The welfare impact of a merger involves the market power offense and the efficiency defense. Salant et al. (1983) show that mergers among symmetric firms are unprofitable except for monopolization. We characterize the limit to this merger paradox in a simple linear Cournot oligopoly with asymmetric costs. Farrell and Shapiro (1990) provide sufficient conditions for a profitable merger to increase welfare but leave open whether it exists. We characterize the degree of cost asymmetry making a merger both profitable and socially desirable. Comparing rationalization and synergy within the efficiency defense, we show that for most industry structures, a rationalization merger is more likely to be welfare enhancing but a synergy merger is more likely to be profitable.

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Horizontal mergers with free entry

Cited by 92 publications

References 14 publications

Horizontal merger under strategic tax policy

Horizontal merger under strategic tax policy

Buyer resistance for cartel versus merger

On Efficiency, Concentration and Welfare

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