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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Mendola, Mariapia / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Horizontal Mergers Without Synergies May Increase Consumer Welfare

Johan Stennek1

1IUI and CEPR,

Citation Information: Topics in Economic Analysis & Policy. Volume 3, Issue 1, ISSN (Online) 1538-0653, DOI: 10.2202/1538-0653.1074, January 2003

Publication History

Published Online:
2003-01-29

Abstract

In imperfectly competitive markets firms with high costs produce positive output. The market's ability to minimize costs is also constrained by the fact that firms' costs are often private information. Mergers in such markets play a dual role. They reduce competition but they also generate an efficiency gain associated with the pooling of information. This paper shows that not only may costs be reduced as a result of merger, the price level may also decline and consumers may thus gain.

Keywords: horizontal merger; welfare; asymmetric information; efficiency defense

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