Document Type
Article
Publication Date
4-3-2017
Abstract
In a simple model I show consumer surplus can increase after competing sellers consummate a profitable merger that generates no cost savings. This finding contrasts sharply with the conventional wisdom that horizontal mergers without efficiencies must enhance sellers’ market power to be profitable, thereby harming buyers. The model fits industries in which individual buyers conduct distinct procurement contests for which sellers incur costs to participate, say to assess their product’s fit with the buyer’s preferences. Mergers benefit buyers by inducing stronger contest-level entry, echoing common claims from merging parties that their merger is beneficial because it creates a stronger competitor.
Recommended Citation
Thomas, C. J. (2017). Profitable horizontal mergers without efficiencies can increase consumer surplus. ESI Working Papers 17-07. Retrieved from http://digitalcommons.chapman.edu/esi_working_papers/217/
Comments
Working Paper 17-07
This paper later underwent peer review and was published as:
Thomas, C. J. (2021). Profitable horizontal mergers without efficiencies can increase consumer surplus. Journal of Industrial Economics, 69(3), 730-741. https://doi.org/10.1111/joie.12249