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Should We Expect Merger Synergies To Be Passed Through to Consumers?

Author

Listed:
  • Sweeting, Andrew
  • Leccese, Mario
  • Tao, Xuezhen

Abstract

Methods used to predict post-merger outcomes assume that synergies are common knowledge and imply that synergies will be at least partially passed through to consumers, potentially offsetting anticompetitive merger effects. However, the common knowledge assumption is inconsistent with other features of the merger review process and its implications are potentially inconsistent with the evidence of merger retrospectives. We relax the assumption in a simple model of post-merger competition and show that strategic incentives can lead a merged firm to not pass through quite large synergies arising in both horizontal and vertical mergers.

Suggested Citation

  • Sweeting, Andrew & Leccese, Mario & Tao, Xuezhen, 2022. "Should We Expect Merger Synergies To Be Passed Through to Consumers?," CEPR Discussion Papers 17059, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17059
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    More about this item

    Keywords

    Oligopoly; Mergers; Asymmetric information; Pooling; Firm conduct; Pass-through;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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