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| Dragan Jovanovic, Christian Wey and Mengxi Zhang |
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| ''On the social welfare effects of runner-up mergers in concentrated markets'' |
| ( 2021, Vol. 41 No.4 ) |
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| This paper argues that it cannot be taken for granted that any merger that raises consumer surplus also increases social welfare. We assume a Cournot model with homogeneous goods, linear demand, and constant marginal costs, to show that a merger can raise consumer surplus while harming social welfare. Within this framework, we show that such an outcome depends on two conditions: the merger is between relatively small firms and it reduces concentration; that is, a constellation which can be characterized as a “runner-up” merger. |
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| Keywords: Runner-up mergers, market shares, merger efficiencies, oligopoly, consumer and social welfare standard |
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L4 - Antitrust Issues and Policies: General |
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| Manuscript Received : Aug 24 2021 | | Manuscript Accepted : Dec 29 2021 |
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