Efficiency and Price Effects of Mergers in European Union's Trade and Manufacturing Sectors

  • Ozana NADOVEZA JELIĆ Department of Macroeconomics and Economic Development Faculty of Economics and Business, University of Zagreb , Croatia Economic Modelling Department, Croatian National Bank, Croatia
  • Marko DRUŽIĆ Department of Economic Theory Faculty of Economics and Business, University of Zagreb, Croatia


There are two basic tendencies operating simultaneously in every merger case: i) welfare gains due to efficiency related price reductions and ii) welfare losses associated with rising market power and resulting higher prices for consumers. The question of which will prevail is theoretically ambiguous, and consequently has to be settled empirically. The main objectives of this paper are to explore the effects of mergers on efficiency of consolidated firms, and to study their effects on prices in the trade and manufacturing sectors. To explore the effects of mergers on efficiency and prices we employ both a micro and macro approach by relying on firm-level data in the analysis of efficiency effects and on national-level data in the evaluation of price effects of mergers by using the Difference-in-Difference (DiD) approach on a sample of merger cases regulated by the European Commission (EC) during the 2010-2013 period. The DiD based results show that consolidated firms performed better than their competitors in the second year following the merger. Estimated efficiency gains seem to be led by efficiency growth of merged firms in the manufacturing sector. At the same time, we find evidence that compared to their unaffected counterparts, countries and economic activities in which the consolidation took place experienced a higher associated inflation in the year of the merger. Therefore, our results suggest that price effects unfold in the year when the merger is realized while efficiency effects occur with a delay of two years.



[1] Ashenfelter, O., and Hosken, D. 2010. The effect of mergers on consumer prices: Evidence from five mergers on the enforcement margin. The Journal of Law and Economics, 53(3): 417–466.
[2] Ashenfelter, O., Hosken, D., and Weinberg, M. 2014. Did Robert Bork understate the competitive impact of mergers? Evidence from consummated mergers. The Journal of Law and Economics, 57(3): 67–100.
[3] Berezovskiy, E.E. et al. 2017. Logistics tools during mergers and acquisitions. Journal of Advanced Research in Law and Economics, Volume VIII, Winter, 8(30): 2354-2360. DOI: https://doi.org/10.14505//jarle.v8.8(30).05
[4] Bertrand, O., and Zitouna, H. 2008. Domestic versus cross-border acquisitions: Which impact on the target firms’ performance? Applied Economics, 40(17): 2221– 2238.
[5] Blonigen, B.A., and Pierce, J.R. 2016. Evidence for the effects of mergers on market power and efficiency, Technical report, National Bureau of Economic Research. NBER Working Paper No. 22750. DOI: 10.3386/w22750. Available at: https://www.nber.org/papers/w22750.pdf
[6] Bork, R. 1978. The Antitrust Paradox: A Policy at War with Itself. New York Free Press. ISBN-10: 0465003702, ISBN-3: 978-0465003709, 462 p.
[7] Braguinsky, S., Ohyama, A., Okazaki, T., and Syverson, C. 2015. Acquisitions, productivity, and profitability: evidence from the japanese cotton spinning industry. American Economic Review, 105(7): 2086–2119.
[8] Chone, P., and Linnemer, L. 2012. A treatment effect method for merger analysis with an application to parking prices in Paris. The Journal of Industrial Economics, 60(4): 631–656.
[9] Epstein, R.J., and Rubinfeld, D.L 2001. Merger simulation: A simplified approach with ew applications. Antitrust Law Journal, 69(3): 883-919.
[10] Focarelli, D., and Panetta, F. 2003. Are mergers beneficial to consumers? Evidence from the market for bank deposits. The American Economic Review, 93(4): 1152–1172.
[11] Frolova, E.E. et al. 2018. General approaches to the market structure control in BRICS countries. Journal of Advanced Research in Law and Economics, Volume IX, Spring, 1(31): 96-105. DOI: https://doi.org/10.14505//jarle.v9.1(31).13
[12] Gugler, K., and Szucs, F. 2016. Merger externalities in oligopolistic markets. International Journal of Industrial Organization, 47: 230–254.
[13] Gugler, K., Mueller, D.C., Yurtoglu, B.B., and Zulehner, C. 2003. The effects of mergers: An international comparison. International Journal of Industrial Organization, 21(5): 625–653.
[14] Hertel, T., and van der Mensbrugghe, D. 2016. Behavioral parameters, in B.N.G., Aguiar, A., and McDougall, R. eds., Global Trade, Assistance, and Production: The GTAP 9 Data Base, Department of Agricultural Economics, Purdue University, West Lafayette, IN, center for global trade analysis 14. Available at: https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=5138
[15] Hortacsu, A., and Syverson, C. 2007. Cementing relationships: Vertical integration, foreclosure, productivity, and prices. Journal of Political Economy, 115(2): 250–301.
[16] Houde, J.F. 2012. Spatial differentiation and vertical mergers in retail markets for gasoline. American Economic Review, 102(5): 2147–82.
[17] Ilzkovitz, F. and Dierx, A. 2015. Ex-post economic evaluation of competition policy enforcement: A review of the literature. Publications Office of the European Union. Technical Report, DOI: 10.2763/83196. ISBN 978-92-79-48350-9. Available at: https://ec.europa.eu/competition/publications/reports/expost_evaluation_ competition_policy_en.pdf
[18] Kamerbeek, S. 2010. Merger performance and efficiencies in horizontal merger policy in the United States and the European Union. Journal of Advanced Research in Law and Economics, Volume I, Summer, 1(1): 16-41.
[19] Kim, E.H., and Singal, V. 1993. Mergers and market power: Evidence from the airline industry. The American Economic Review, 83(3): 549–569.
[20] Kulick, R.B. 2017. Ready-to-mix: Horizontal mergers, prices, and productivity. US Census Bureau Center for Economic Studies Paper No. CES-WP-17-38.
[21] Leheyda, N., Beschorner, P., Huschelrath, K. 2011. Ex-post assesment merger effects: The case of Pfizer and Pharmacia (2003). Journal of Advanced Research in Law and Economics, Volume II, Summer, 1(3): 18-47
[22] Maksimovic, V., and Phillips, G .2001. The market for corporate assets: Who engages in mergers and asset sales and are there efficiency gains? Journal of Finance, 56(6): 2019–2065.
[23] McGuckin, R.H., and Nguyen, S.V. 1995. On productivity and plant ownership change: New evidence from the longitudinal research database. The RAND Journal of Economics, 26(2): 257–276.
[24] Montoriol-Garriga, J. 2008. Bank mergers and lending relationships. European Central Bank, Working Paper Series: 934. Available at: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp934.pdf
[25] Pratten, C.F. 1988. A survey of the economies of scale. Directorate-General for Economic and Financial Affairs, Commission of the European Communities, 67 pp.
[26] Stigler, G.J. 1950. Monopoly and oligopoly by merger. The American Economic Review, 40: 23–34.
[27] Werden, G.J., and Froeb, L.M. 1994. The effects of mergers in differentiated products industries: Logit demand and merger policy. Journal of Law, Economics and Organization, 10(2): 407-426.
[28] Williamson, O. E. 1968. Economies as an antitrust defense: The welfare tradeoffs. The American Economic Review, 58(1): 18–36.
[29] Ye, C. et al. 2014. Does payment method of mergers and acquisitions matter? An examination of the medical industry in China. Journal of Advanced Studies in Finance, Volume V, Summer, 1(19): 37-46.
How to Cite
JELIĆ, Ozana NADOVEZA; DRUŽIĆ, Marko. Efficiency and Price Effects of Mergers in European Union's Trade and Manufacturing Sectors. Journal of Advanced Research in Law and Economics, [S.l.], v. 10, n. 4, p. 993-1012, june 2019. ISSN 2068-696X. Available at: <https://journals.aserspublishing.eu/jarle/article/view/4711>. Date accessed: 30 nov. 2021. doi: https://doi.org/10.14505//jarle.v10.4(42).02.