Corporate mergers generally have net negative effects on consumer welfare
the verdict
CONTESTED
contested - evenly split
refutedsupported
the weight of evidence
5 sources for · 3 against
The literature presents mixed findings on corporate mergers, with some studies demonstrating efficiency gains, R&D improvements, and consumer benefits, while others report anticompetitive harms and negative welfare impacts particularly in sectors like healthcare and airlines.
Policy Points Hospital executives posit a number of rationales for system mergers which lack any basis in academic evidence. Decades of academic research question whether system combinations confer public benefits. Antitrust authorities need to continue to closely scrutinize these transactions. Recently, mergers of hospital systems that span different geographic markets are on the rise. Economists have alerted policymakers about the potential impacts such cross-market mergers may have on hospital prices. We suggest there are other reasons for concern that scholars have not often confonted. Cross-market mergers may be conducted for purely self-serving reasons of organizational growth that increases executive compensation. Combinations of sellers should have clear advantages to consumers. System executives and their boards should bear the burden of proof. Federal regulators and state attorney generals should be cognizant that rationales for cross-market systems advanced by merging parties are unlikely to be operative or dominant in merger decision making. Policymakers should be careful about passing legislation that encourages hospitals to consolidate.<h4>Context</h4>There is a growing trend of combinations among hospital systems that operate in different geographic markets known as cross-market mergers. Economists have analyzed these broader systems in terms of their anticompetitive behavior and pricing power over insurers. This paper evaluates the benefits advanced by these new hospital systems that speak to a different set of issues not usually studied: increased efficiencies, new capabilities, operating synergies, and addressing health inequities. The paper thus "looks under the hood" of these emerging, cross-market systems to assess what value they might bestow and upon whom.<h4>Methods</h4>The paper examines recently announced cross-market mergers in terms of their supposed benefits, as expressed by the systems' executives as well as by industry consultants. These presumed benefits are then evaluated against existing evidence regarding hospital system outcomes.<h4>Findings</h4>Advocates of cross-market hospital mergers cite a host of benefits. Research suggests these benefits are nonexistent. Additional evidence suggests other motives may be at play in the formation of cross-market mergers that have nothing to do with efficiencies, synergies, or community benefits. Instead these mergers may be self-serving efforts by system chief executive officers (CEOs) to boost their compensation.<h4>Conclusions</h4>Cross-market hospital mergers may yield no benefits to the hospitals involved or the communities in which they operate. The boards of hospital systems that engage in these cross-market mergers need to exercise greater diligence over the actions of their CEOs.
Abstract A common view in antitrust analysis is that mergers of complements can have raising rivals’ costs and elimination of double marginalization effects, with the net effect on consumer welfare thus unclear. We revise this view in the context of a merger between a monopolist in one market and a duopoly producer of a complement good. With linear demand and imperfect substitutability, while such a merger increases the price of the monopolized component, elimination of double marginalization dominates any raising rivals’ costs effects, increasing consumer welfare. We discuss a variety of extensions.
BACKGROUND: Hospitals controlled by private firms, like many private sectors, will employ market strategies to safeguard their investments and increase the profitability of the services they provide. These market strategies not only determine their financial success but also influences broader outcomes, including health system performance and population health indicators. Yet, strategies that enhance market influence and profitability may at times diverge from those aimed at improving health outcomes. This raises issues around market power imbalances and concerns that hospitals could prioritise profits over health if forced to choose. This systematic scoping review sought to identify and synthesise scholarly evidence on the market strategies employed by private hospitals to expand and consolidate market power. METHODS: Titles and abstracts of 1,642 English-language articles sourced from seven databases were screened, with 371 articles assessed for eligibility based on whether they identified the use of market strategies within a hospital setting. Data from 133 relevant studies were extracted and analysed thematically using Porter’s ‘Five Forces’ framework. RESULTS: We identified 22 distinct market strategies used by private hospitals, falling under six interconnected strategic objectives: 1) reduce rivalry among existing competitors; 2) raise barriers to market entry by new competitors; 3) counter the threat of market disruptors and drive patient health service usage towards hospital care provided by the hospital; 4) increase hospital buyer power by exerting leverage over upstream actors; 5) Increase hospital seller power by exerting leverage over downstream organisational actors; and 6) increase hospital seller power by exerting leverage over downstream individual actors. Although international in scope, the United States accounted for over two-thirds of the studies included. This partly reflects the dominance of U.S. scholarship in these areas. CONCLUSION: The resulting typological framework offers a structured means of analysing hospital market strategies internationally, within and across jurisdictions. Additionally, it can aid the identification of pertinent public policies, such as those addressing merger control, unfair trading practices, and public procurement. This works to bolster policy-analytic functions that can be influential in rectifying market-power imbalances.
This paper explores the effects of a European airline merger followed by a consolidation of two competing international alliances. The exercise has been inspired by the Air France-KLM merger, which is expected to spur consolidation of the Northwest-KLM and SkyTeam alliances into a single mega-alliance. The results of the analysis show that, although the airlines benefit through higher profits, the merger and alliance consolidation harm consumers while reducing overall social surplus. The reason for this negative outcome is that, as modeled, all the effects of the merger and alliance consolidation are anticompetitive.
<p>In the late 1990s, many U.S. states deregulated electric utilities, allowing for competition among power generators. Deregulated states then adopted retail choice programs, allowing customers to choose their power provider. In addition, a significant merger wave among large utilities ensued. How did these events impact consumer welfare? This study examines the effects of utility deregulation and mergers, by analyzing electricity price and output changes among deregulated and regulated states. I find that deregulation may have had a positive effect when states adopted certain measures, such as retail choice or fuel changes, that enhanced competition and lowered costs. Mergers also affected consumer welfare, with differential impacts found between the merger of generation firms versus the merger of generation and transmission companies. </p>
The public health community has become increasingly critical of the role that powerful corporations play in driving unhealthy diets, one of the leading contributors to the global burden of disease. While a substantial amount of work has examined the political strategies used by dominant processed food manufacturers that undermine public health, less attention has been paid to their use of market strategies to build and consolidate power. In this light, this paper aimed to systematically review and synthesise the market strategies deployed by dominant processed food manufacturers to increase and consolidate their power. A systematic review and document analysis of public health, business, legal and media content databases (Scopus, Medline, ABI Inform, Business Source Complete, Thomas Reuters Westlaw, Lexis Advance, Factiva, NewsBank), and grey literature were conducted. Data extracted were analysed thematically using an approach informed by Porter's 'Five Forces' framework. 213 documents met inclusion criteria. The market strategies (n=21) and related practices of dominant processed food manufacturers identified in the documents were categorised into a typological framework consisting of six interconnected strategic objectives: i) reduce intense competition with equivalent sized rivals and maintaining dominance over smaller rivals; ii) raise barriers to market entry by new competitors; iii) counter the threat of market disruptors and drive dietary displacement in favour of their products; iv) increase firm buyer power over suppliers; v) increase firm seller power over retailers and distributors; and vi) leverage informational power asymmetries in relations with consumers. The typological framework is well-placed to inform general and jurisdiction-specific market strategy analyses of dominant processed food manufacturers, and has the potential to assist in identifying countervailing public policies, such as those related to merger control, unfair trading practices, and public procurement, that could be used to address market-power imbalances as part of efforts to improve population diets.
Abstract In imperfectly competitive markets firms with high costs produce positive output. The market's ability to minimize costs is also constrained by the fact that firms' costs are often private information. Mergers in such markets play a dual role. They reduce competition but they also generate an efficiency gain associated with the pooling of information. This paper shows that not only may costs be reduced as a result of merger, the price level may also decline and consumers may thus gain.
Enterprise mergers are essential for the development and growth of enterprises, and they are also an important mechanism for the market economy to improve the overall efficiency of the market through the survival of the fittest. Compared to gradually growing a company through internal accumulation, merging with other companies can achieve various goals such as scale expansion, business expansion, and financial optimization faster in a short period. Although business mergers are spontaneous actions of enterprises, the merger of enterprises, especially large enterprises, affects their performance and consumer welfare. To better study the potential impact of corporate mergers, this article combines traditional and modern merger theories to investigate the positive effects of corporate mergers on product prices, corporate innovation, and overall consumer welfare. The impact channels of Chinese-listed company mergers on their R&D expenses are evaluated empirically. Through empirical and theoretical analysis, this article proves that business mergers can improve efficiency, innovation, and consumer benefits by increasing research and development expenditures.
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