When Efficient Firms Flock Together: Merger Incentives Under Yardstick Competition

Teusch, Jonas Michael

doi:10.1007/s11151-018-9670-8

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When Efficient Firms Flock Together: Merger Incentives Under Yardstick Competition

Teusch, Jonas Michael

2019 • In Review of Industrial Organization, 55 (2), p. 237-255

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https://hdl.handle.net/2268/265959

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10.1007/s11151-018-9670-8

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Keywords :

Incentive regulation; Merger analysis; Yardstick competition

Abstract :

[en] Local monopolists that are regulated by yardstick competition frequently merge with their peers. However, economic theory provides little guidance for merger analysis. In contrast, the theoretical model in this article shows that there can be room for strategic firm behaviour even in a setting where firms are many and collusion is not sustainable. Specifically, the article derives conditions under which firms propose welfare-decreasing mergers to avoid competition with efficient peers and establishes when peer effects discourage firms from implementing socially desirable mergers. Efficient peers flock together whereas inefficient firms remain independent, unless peer effects are counteracted by efficiency effects. © 2018, Springer Science+Business Media, LLC, part of Springer Nature.

Disciplines :

Strategy & innovation

Author, co-author :

Teusch, Jonas Michael ; Université de Liège - ULiège

Language :

English

Title :

When Efficient Firms Flock Together: Merger Incentives Under Yardstick Competition

Publication date :

2019

Journal title :

Review of Industrial Organization

ISSN :

0889-938X

eISSN :

1573-7160

Publisher :

Kluwer Academic Publishers, Netherlands

Volume :

Issue :

Pages :

237-255

Peer reviewed :

Peer Reviewed verified by ORBi

Available on ORBi :

since 11 December 2021

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1 (1 by ULiège)

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