Strategic Buyers, Horizontal Mergers and Synergies: An Experimental Investigation

Document Type

Article

Publication Date

2008

Abstract

This paper reports an experiment designed to evaluate interrelationships between strategic buyers, market power and merger-induced synergies. The experiment consists of 40 posted-offer quadropolies. Treatments include the use of simulated or human buyers, seller consolidations and merger-induced fixed cost and unit cost synergies. In the simulated-buyer markets we observe behavior generally consistent with comparative static predictions: prices rise post-merger, and unit (but not fixed) cost synergies may exert some price-moderating effect. The addition of powerful buyers changes results markedly. Although prices are lower in the human buyer markets, outcomes are more variable and predicted comparative static effects are no longer observed.

Comments

This article was originally published in International Journal of Industrial Organization, volume 26, issue 3, in 2008. DOI: 10.1016/j.ijindorg.2006.12.004

Peer Reviewed

1

Copyright

Elsevier

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