Wednesday, April 23, 2008
Mergers and market power
Do mergers increase prices and allow the new combination to gain market power? A new study suggests that they do. Looking at some extreme cases where makers of substitute products got together, Orley Ashenfelter and Danniel Hosken report an increase of prices of between 3% and 7%. This does not look at long-term cost improvements that may be apparent or the effect of the development of new products. However, given the large-scale industries that are represented, it does suggest a substantial transfer from consumers to producers.