Profitable horizontal mergers without cost advantages

Huck, Steffen; Konrad, Kai A. and Müller, Wieland (March 2001): Profitable horizontal mergers without cost advantages. The role of internal organization, information and market structure. CESifo Working Papers

Abstract

Merged firms are typically rather complex organizations. Accordingly, merger has a more profound effect on the structure of a market than simply reducing the number of competitors. We show that this may render horizontal mergers profitable and welfare-improving even if costs are linear. The driving force behind these results, which help to reconcile theory with various empirical findings, is the assumption that information about output decisions flows more freely within a merged firm.

• Item Type: Paper
• Keywords: Merger; internal organizational structure; information; timing, market structure
• Faculties: Economics > Chairs > MPI for Tax Law and Public Finance
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: L11, L13, L22, L41
• ISSN: 0013-0427
• Place of Publication: München
• Language: English