MERGER, EASE OF ENTRY AND ENTRY DETERRENCE IN A DYNAMIC MODEL

Authors: MARINO, ANTHONY M.¹; ZÁBOJNÍK, JÁN²

Source: Journal of Industrial Economics, Volume 54, Number 3, September 2006 , pp. 397-423(27)

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Abstract:

We analyze whether ease and speed of entry can mitigate the anti-competititve effects of a merger, in a dynamic model of endogenous merger. In our model, if new firms can enter quickly, it is more likely that merger is motivated by efficiency as opposed to increased market power. Thus, there is less reason to challenge the merger. On the other hand, if entry of new firms becomes less costly, firms may have a stronger incentive to monopolize the industry through horizontal merger. We also show that when the incumbent can engage in entry deterrence activities, anti-merger policy can decrease welfare.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-6451.2006.00294.x

Affiliations: 1: Marshall School of Business, University of Southern California, Los Angeles, California, 90089-1427, U. S. A. , Email: amarino@marshall.usc.edu 2: Marshall School of Business, University of Southern California, Los Angeles, California 90089-1427, U.S.A. , Email: zabobjnik@marshall.usc.edu

Publication date: 2006-09-01