Working Paper Series
Should Mergers be Controlled?
() and Johan Stennek
Abstract: Anticompetitive mergers benefit competitors more than the
merging firms. We show that such externalities reduce firms' incentives to
merge (a holdup mechanism). Firms delay merger proposals, thereby foregoing
valuable profits and hoping other firms will merge instead - a war of
attrition. The final result, however, is an overly concentrated market. We
also demonstrate a surprising intertemporal link: Merger incentives may be
reduced by the prospect of additional profitable mergers in the future.
Merger control may help protect competition. Holdup and intertemporal links
make policy design more difficult, however. Even reasonable policies may be
worse than not controlling mergers at all.
Keywords: Endogenous Mergers & Acquisitions; Coalition Formation; Competition Policy; (follow links to similar papers)
JEL-Codes: C78; L12; L41; (follow links to similar papers)
40 pages, December 14, 2000
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