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2006•Annals of economics and financeRequires access

A Note on the Welfare Eects of Horizontal Mergers in Asymmetric Linear Oligopolies

Steven Heubeck, Donald J. Smythe, Jingang Zhao

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Abstract

viding necessary and sucient conditions for horizontal mergers to be both profitable and welfare-enhancing when market demand and firms’ costs are linear. We show that profitable, welfare-enhancing mergers are likely to involve firms whose combined pre-merger market shares exceed 50%, and that mergers may be profitable and welfare-enhancing even when they do not generate any direct cost eciencies. Our results suggest that any approach to

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viding necessary and sucient conditions for horizontal mergers to be both profitable and welfare-enhancing when market demand and firms’ costs are linear. We show that profitable, welfare-enhancing mergers are likely to involve firms whose combined pre-merger market shares exceed 50%, and that mergers may be profitable and welfare-enhancing even when they do not generate any direct cost eciencies. Our results suggest that any approach to

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Available abstract

viding necessary and sucient conditions for horizontal mergers to be both profitable and welfare-enhancing when market demand and firms’ costs are linear. We show that profitable, welfare-enhancing mergers are likely to involve firms whose combined pre-merger market shares exceed 50%, and that mergers may be profitable and welfare-enhancing even when they do not generate any direct cost eciencies. Our results suggest that any approach to

Key concepts: Oligopoly, Welfare, Economics, Microeconomics, Monetary economics, Market economy

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