Which factors affect market power after merger?

1. Seller concentration • Mergers between small companies in fragmented markets hardly give market power (-) • Mergers between large firms in concentrated markets increases market power and increases the likelihood of coordinated behavior (+) 2. Productive capacity of rivals • If rivals do not have idle capacity can not benefit from higher prices, which is often the consequence of a merger  higher market share for the merged firm (+) • Otherwise depends on how much idle capacity the rival has (+/-) 3. Buyer concentration • Few large buyers will bargain on price increases which puts a constraint on market power and the gains from a merger decrease (-) • If many buyers (i.e. not concentrated), merged firm can set higher prices (+) 4. Demand: if demand elasticity is low (+), otherwise (-) 5. Potential entry: The faster market entry the harder it will be to sustain market power - even after a merger (-)