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Estimating Differential Dynamic Merger Effects on Market Structure and Entry in Related Markets

  • Ralph B. SiebertEmail author
Article
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Abstract

The U.S. and EU merger guidelines emphasize “ease of entry” arguments but little is known about the dynamic impact of realized mergers on market structure. This study provides insights on this topic with the use of detailed firm-level data on the memory chip market. Our estimation results provide evidence for differential merger effects on market structure. These effects depend on whether the mergers are dominated by market-power or efficiency gains. While efficiency-dominated mergers cause exit, market-power-dominated mergers attract entrants, and these effects are increasing over time. We also find that market-power mergers have a larger effect on entry than efficiency mergers have on exit. Our results show that mergers can reduce the number of potential entrants into related product markets and serve as an instrument to “reduce the likelihood of entry”.

Keywords

Competitive effects Dynamic merger effects Entry Entry in related markets Horizontal mergers Market structure 

JEL Classification

L11 L13 L52 O31 O32 O38 

Notes

Acknowledgements

I would like to thank Dennis Carlton, Sebastian Linde, Stephen Martin, Sam Peltzman, Susana Restrepo, Lars-Hendrik Roeller, Lawrence J. White, and seminar participants for their helpful discussions and valuable suggestions. All errors are my own.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of Economics, CESifo, Krannert School of ManagementPurdue UniversityWest LafayetteUSA

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