Working Paper Series
Industry Concentration and Welfare - On the Use of Stock Market Evidence from Horizontal Mergers
() and Johan Stennek
Abstract: 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 anticompetitive 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 rumor" 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.
Keywords: Mergers & Acquisitions; Event Studies; Antitrust; In-play; Coalition Formation; (follow links to similar papers)
JEL-Codes: G14; G34; L12; L41; (follow links to similar papers)
45 pages, December 6, 2006
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