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  3. American Economic Journal: Microeconomics
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  5. Mergers, Entry, and Consumer Welfare

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Mergers, Entry, and Consumer Welfare

  • Peter Caradonna
  • Nathan H. Miller
  • Gloria Sheu
American Economic Journal: Microeconomics (Forthcoming)

Abstract

We model merger-induced entry in the context of differentiated-products price competition. We fully characterize the combinations of merger efficiencies and entrant qualities that can mitigate the adverse equilibrium welfare effects of an otherwise anticompetitive merger. The possibility of merger-induced entry introduces non-monotonicity into the equilibrium value that consumers receive from merger efficiencies, potentially necessitating the joint analysis of efficiencies and entry in merger review. We also explicitly characterize the efficiencies required for merger-induced entrants to make profitable mergers consumer surplus-neutral. We provide an empirical application to the T-Mobile/Sprint merger.

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