American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Mergers, Entry, and Consumer Welfare
American Economic Journal: Microeconomics
(pp. 103–30)
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 nonmonotonicity 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.Citation
Caradonna, Peter, Nathan H. Miller, and Gloria Sheu. 2025. "Mergers, Entry, and Consumer Welfare." American Economic Journal: Microeconomics 17 (3): 103–30. DOI: 10.1257/mic.20240057Additional Materials
JEL Classification
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- G38 Corporate Finance and Governance: Government Policy and Regulation
- K21 Antitrust Law
- L13 Oligopoly and Other Imperfect Markets
- L41 Monopolization; Horizontal Anticompetitive Practices