American Economic Review Vol. 112 No. 6 2022

Concentration Thresholds for Horizontal Mergers

Volker Nocke¹; Michael D. Whinston²

¹ Department of Economics, University of Mannheim, and School of Economics, University of Surrey (email: ) · ² Department of Economics and Sloan School of Management, MIT (email: )

Abstract

Concentration-based thresholds for horizontal mergers, such as those in the US Horizontal Merger Guidelines, play a central role in merger analysis but their basis remains unclear. We show that there is both a theoretical and an empirical basis for focusing solely on the change in concentration, and ignoring its level, in screening mergers for whether their unilateral price effects will harm consumers. We also argue that current threshold levels likely are too lax, unless one expects efficiency gains of 5 percent or greater, or other factors such as entry and product repositioning to significantly constrain the exercise of market power postmerger.

DOI

10.1257/aer.20201038

Volume

112

Issue

6

Pages

1915-1948

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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