Impacts from meatpacking firm mergers in an experimental market

The Fed Cattle Market Simulator (FCMS), an experimental market, was used to estimate impacts from two meatpacking firm mergers. Data were collected from two FCMS workshops with large agribusiness firms. Experimental mergers involved the two smaller packers in the market in one case and the two larger packers in another. During the merger period, market prices were significantly higher than prior to the merger in both cases. Following the dissolution, results were mixed. Management of the merged firms appeared to significantly affect how effectively merged packers operated, thus affecting both behavior and performance. For both mergers, profits of the merged firm were higher relative to profits of rival firms. Merged firms appeared to have achieved some synergies in procurement or economies of scope (i.e., multi-plant economies). An increased Herfindahl index was associated with lower fed cattle prices in one case and higher prices in the other. [EconLit citations: L130, L290, L660]. © 2002 John Wiley & Sons, Inc.