Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 558: Horizontal Mergers Without Synergies May Increase Consumer Welfare

Johan Stennek ()
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Johan Stennek: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Markets with imperfect competition do not induce a cost-minimizing allocation of production between firms. The market's ability to rationalize production is even more limited if costs are private information to firms. Merger in such markets generate an efficiency gain associated with the pooling of information. Not only may costs be reduced, the price level and price variability may also decline and consumers may thus gain.

Keywords: Horizontal Merger; Welfare; Asymmetric Information

JEL-codes: D43; D82; G34; L10

13 pages, June 4, 2001

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