THE COMPETITIVE EFFECTS OF MERGERS - STOCK-MARKET EVIDENCE FROM THE US STEEL DISSOLUTION SUIT

We apply and extend the Eckbo-Stillman event-study methodology to inve stigate the competitive effects of the U.S. Steel consolidation. In co ntrast to previous event studies, we examine the stock market reaction s of downstream firms, thereby enabling us to estimate the net effect of a merger or antitrust action on product market prices. Specifically , we examine the stock marker reactions of U.S. Steel, major steel ind ustry rivals, and downstream customers to events from the unsuccessful dissolution suit begun in 1911 and decided in 1920. The pattern of re actions implies that the dissolution of U.S. Steel would have lowered steel prices and raised output.