search query: @indexterm MERGERS / total: 2376
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| Author: | Cabral, L. M. B. |
| Title: | Horizontal mergers with free-entry: why cost efficiencies may be a weak defense and asset sales a poor remedy |
| Journal: | International Journal of Industrial Organization
2003 : MAY, VOL. 21:5, p. 607-623 |
| Index terms: | Mergers Economic efficiency Asset valuation |
| Freeterms: | Asset sales |
| Language: | eng |
| Abstract: | The author analyzes the effects of a merger between two firms in a spatially differentiated oligopoly. He makes the crucial assumption that the industry is at a free-entry equilibrium both before and after the merger, and shows that cost efficiencies decrease the likelihood of entry, and thus benefit consumers less than if entry conditions were exogenously given. Likewise, by selling assets to potential rivals, merging firms effectively 'buy them off', that is, dissuade them from opening new stores, an effect that may be detrimental to consumers. |
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