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 and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

About the book

Events

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