Price and welfare effects and regulation of horizontal mergers
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School of Business |
Bachelor's thesis
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Authors
Date
2021
Department
Major/Subject
Mcode
Degree programme
Taloustiede
Language
en
Pages
28
Series
Abstract
Generally, mergers represent a significant part of the economy, and they include a trade-off between efficiency effects and anticompetitive effects. Mergers may produce efficiency effects such as reallocating costs but also anticompetitive effects such as price increases or quality decreases. This literature review studies the effects of mergers on price and welfare under the Cournot model. This thesis shows that mergers which do not include synergies, such as production reallocations, result with higher prices. Moreover, the privately profitable mergers will increase the aggregate welfare. Even though the aggregate welfare will increase, the consumer surplus will decrease through higher prices. Thus, the welfare effects are controversial since there are several ways to examine the welfare effects. Further, crucial part of merger analysis is the merger regulation. Competition authorities desire is to protect consumers’ rights through regulation. Thus, this thesis includes two merger cases in Finnish healthcare sector, and their effects to the competition and market. The merger analysis process of competition authorities has similarities with the theoretical framework introduced in this thesis.Description
Thesis advisor
Murto, PauliKeywords
horizontal merger, price effect, welfare effect, merger control, regulation, synergies, oligopoly model