Change search
ReferencesLink to record
Permanent link

Direct link
Mergers in Congested Markets
Stockholm University, Faculty of Social Sciences, Department of Economics.
Manuscript (Other academic)
URN: urn:nbn:se:su:diva-23510OAI: diva2:192423
Part of urn:nbn:se:su:diva-319Available from: 2004-12-16 Created: 2004-12-16 Last updated: 2010-01-13Bibliographically approved
In thesis
1. Mergers, Congestion and Collusion: Essay on Merger Policy
Open this publication in new window or tab >>Mergers, Congestion and Collusion: Essay on Merger Policy
2004 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of four essays on merger policy.

An Econometric Analysis of the European Commission's Merger Decisions

Using a sample of 96 mergers notified to the EU Commission and logit regression techniques, this essay analyses the Commission's decision process. The study finds that the probability of a phase 2 investigation and of a prohibition of the merger increases with the parties' market shares. The probabilities increase also when the Commission finds high entry barriers or that post-merger collusion is easy. We do not find significant effects of "political" variables, such as the nationality of the merging firms.

Merger Policy with Alternative Mergers and Efficiency Gains

This essay models the behaviour of a Competition Authority (CA) that takes into consideration alternative future mergers when deciding whether to approve a current merger notification. The result is a more stringent CA that demands higher merger-efficiencies than those needed to restore pre-merger welfare, thereby opening the possibility of challenging a merger reducing prices. However, in the absence of entry and exit, a merger policy considering alternative mergers is never consumer welfare decreasing. Additionally, CA's merger-efficiencies expectations play an important role in the stance adopted by the CA (tougher or laxer). Finally, the paper suggests that even when alternative mergers could have positive effects on consumer welfare, CAs should exercise caution in adopting such merger policy, given the significant side-effects.

Mergers in Congested Markets

The novel feature of this study is the focus on consumer-side merger efficiencies. It is argued that mergers may create efficiencies directly affecting utility, for example in terms of reduced waiting time, rather than indirectly through reductions in price. Specifically, we analyse the effects of mergers on prices and welfare in markets facing congestion and derive conditions under which a merger is consumer welfare improving, even in the absence of marginal cost savings. In our context, a merger basically has two effects. First, it obviously increases market concentration and second, it makes the new entity a more aggressive competitor. The paper shows that mergers entailing a more efficient use of installed capacity can result in important price reductions. Moreover, even when the post-merger price of the new merged entity increases, outsiders may respond by decreasing prices and the overall effect may be a consumer welfare gain. Thus, the current merger policy may be inappropriate in these types of markets. From a policy perspective, it could thus be argued that the competition authorities should demand less in terms of "standard" merger-efficiencies in order to approve the merger in a congested market, especially when there are synergies in terms of capacity utilization.

Coordinated Merger Effects in Congested Markets

This paper contributes to the analysis of congested markets. In particular, the analysis focuses on the impact of a merger on firms' incentives to tacitly collude or deviate from a collusive agreement in markets with firm-level congestion. Unilateral merger effects in this type of markets have been analysed by Häckner and Razo (2004). This paper complements their work by concentrating on coordinated merger effects in congested markets. The main findings are that even though a merger reduces the number of firms in the market, which in itself facilitates collusion, the capacity increase of the merged entity creates a market asymmetry that may hinder collusive behaviour.

Place, publisher, year, edition, pages
Stockholm: Nationalekonomiska institutionen, 2004. 116 p.
Dissertations in Economics (Stockholm), ISSN 1404-3491 ; 2005:1
Mergers, Collusion, Congestion
National Category
urn:nbn:se:su:diva-319 (URN)91-7265-992-0 (ISBN)
Public defence
2005-01-13, hörsal 4, hus B, Universitetsvägen 10, Stockholm, 10:00
Available from: 2004-12-16 Created: 2004-12-16Bibliographically approved

Open Access in DiVA

No full text

By organisation
Department of Economics

Search outside of DiVA

GoogleGoogle Scholar
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 23 hits
ReferencesLink to record
Permanent link

Direct link