Can consumer surplus decrease with merger efficiencies?

• Type: Article in International Scientific Journal
• Date: 2024-06

Authors

Brito, D (Author) Other; Helder Vasconcelos (Author) FEP

Journal

Title: Economics Letters

Vol. 239

ISSN: 0165-1765

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 0 Citations

Scopus - 0 Citations

Other information

Authenticus ID: P-010-EAS

DOI: 10.1016/j.econlet.2024.111732

Abstract (EN): This paper investigates the impact of mergers on consumer welfare within a Cournot model, considering mergers driven by anticipated efficiency gains and potential post-merger entry. In this framework, we demonstrate that: (i) modest efficiencies can make both merger and entry beneficial, benefiting consumers; (ii) moderate efficiencies may deter entry, harming consumers due to the merger; and (iii) significant efficiencies may discourage entry but lead to lower prices, benefiting consumers. This result, therefore, embodies an important policy implication that assessing the overall effect of a merger on consumer surplus requires evaluating merger-specific synergies alongside the likelihood of post-merger entry.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 5