Mergers Boost Profits for Remaining Firms, Squeeze Consumers in Oligopolies
The study looked at how mergers in oligopolistic markets affect firm profitability and market shares. By analyzing data from European Commission investigations, the researchers found that when a merger reduces the number of competitors, non-merging firms increase their output and profits, while merging firms struggle to break even. This effect is more pronounced in industries with fewer competitors and higher initial profits.