12/7/2023 0 Comments Wise care 365 pro key 4.912 This article proposes a tractable dynamic oligopoly model in which mergers, innovation, and entry-exit are endogenous, estimates it using data from the process of industry consolidation among the manufacturers of hard disk drives (HDDs) between 19, and quantifies a dynamic welfare trade-off by simulating hypothetical merger policies. Indeed, in 100% of high-tech merger cases, the antitrust authority has tried to assess potential impacts on innovation but found little guidance in the economics literature. Berry and Pakes (1993) conjectured such dynamic factors could dominate static factors. However, Demsetz (1973) cautioned that monopolies are often endogenous outcomes of competition and innovation. 1 Such a static analysis would be appropriate if mergers were completely random events in isolation from competition and innovation, and if market structure and firms’ productivity evolved exogenously over time. Conventional merger analysis takes a proposed merger as given and focuses on its immediate effects on competition, which is expected to decrease after a target firm exits, and efficiency, which might increase if sufficient “synergies” materialize. How far should an industry be allowed to consolidate? This question has been foundational for antitrust policy since its inception in 1890 as a countermeasure to merger waves (c.f.
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