Welfare Tradeoffs of a Horizontal Merger

1
Welfare Tradeoffs of a Horizontal Merger
Oliver Williamson contends thata horizontal
merger can bewelfare-enhancing, even if the
post-merger marketstructure ismonopolistic.
Why? Becausethe merger may result in
greatertechnical/cost efficiency.
2
If area A2 exceedsarea A1, the mergerincreases
the total surplus (TS)
Price
The efficiencygain is reflectedby the shift
from AC toAC
PM
A1
AC
PC
A2
AC
D
0
QC
Quantity
QM