Premium
Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers
Author(s) -
FRIDOLFSSON SVENOLOF,
STENNEK JOHAN
Publication year - 2010
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2009.00795.x
Subject(s) - competitor analysis , market share , event study , welfare , business , stock (firearms) , economics , consumer welfare , industrial organization , empirical evidence , market economy , marketing , context (archaeology) , mechanical engineering , paleontology , philosophy , epistemology , engineering , biology
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.