2006–2010

Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers

Reprint No. 2010:23

Author(s): Sven-Olof Fridolfsson and Johan StennekYear: 2010 Title: Economica Volume (No.): 77 (308) Pages: 734–750
Online article (restrictions may apply)


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.


Reference:
Fridolfsson, Sven-Olof and Johan Stennek (2010), "Industry Concentration and Welfare: On the Use of Stock Market Evidence from Horizontal Mergers". Economica 77(308), 734–750.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

About the book

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To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

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