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Current Department of Justice merger guidelines assume that merging the capacities of two firms will translate into an equivalent increase in market shares. Size matters. Economic theory asserts size is determined by marginal revenue and marginal cost not capacity. Size does not matter. In this paper we run horizontal merger experiments and find that the firms tend to share monopoly profits regardless of the size of the firms.
University of Colorado Denver, Department of Economics,1380 Lawrence St., Suite 460 Campus Box 181 P.O. Box 173364, Denver, CO 80217-3364, United States
University of Colorado Denver, Department of Economics,1380 Lawrence St., Suite 460 Campus Box 181 P.O. Box 173364, Denver, CO 80217-3364, United States