Further Comment on the Social Benefits from an Effective Antimerger Policy

Further Comment on the Social Benefits from an Effective Antimerger Policy Review of Industrial Organization 12: 701–702, 1997. 1997 Kluwer Academic Publishers. Printed in the Netherlands. Further Comment on the Social Benefits from an Effective Antimerger Policy DENNIS C. MUELLER Both Donald Dewey and F. M. Scherer have been gracious in their comments and dissents from my proposals for merger reform, and it would be ungracious of me to take great issue with them. But there are a couple of statements of fact and principle in Donald Dewey’s comment that warrant rebuttal. Professor Dewey claims that “nobody has ever satisfactorily explained why monopoly rent and market concentration should be positively correlated”. “No coherent theory has ever been advanced to justify the use of this convention.” Such positive correlations are implied by standard Cournot oligopoly models, howev- er, and with the additions of conjectural variations and the like can be regarded as reasonably coherent theories of why concentration may matter (Cowling and Waterson, 1976). On the empirical side there is a growing list of studies that finds positive relationships between market concentration or firm market shares and prices (e.g. Weiss, 1989; Evans and Kessidies, 1994). These studies remove much of the ambiguity of traditional structure/performance studies over whether concentration (market share) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Further Comment on the Social Benefits from an Effective Antimerger Policy

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Publisher
Springer Journals
Copyright
Copyright © 1997 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1007728029593
Publisher site
See Article on Publisher Site

Abstract

Review of Industrial Organization 12: 701–702, 1997. 1997 Kluwer Academic Publishers. Printed in the Netherlands. Further Comment on the Social Benefits from an Effective Antimerger Policy DENNIS C. MUELLER Both Donald Dewey and F. M. Scherer have been gracious in their comments and dissents from my proposals for merger reform, and it would be ungracious of me to take great issue with them. But there are a couple of statements of fact and principle in Donald Dewey’s comment that warrant rebuttal. Professor Dewey claims that “nobody has ever satisfactorily explained why monopoly rent and market concentration should be positively correlated”. “No coherent theory has ever been advanced to justify the use of this convention.” Such positive correlations are implied by standard Cournot oligopoly models, howev- er, and with the additions of conjectural variations and the like can be regarded as reasonably coherent theories of why concentration may matter (Cowling and Waterson, 1976). On the empirical side there is a growing list of studies that finds positive relationships between market concentration or firm market shares and prices (e.g. Weiss, 1989; Evans and Kessidies, 1994). These studies remove much of the ambiguity of traditional structure/performance studies over whether concentration (market share)

Journal

Review of Industrial OrganizationSpringer Journals

Published: Sep 29, 2004

References

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