News at Mason
Mason experts discuss Dow-DuPont mega-merger
December 15, 2015
Is the proposed $130 billion merger between chemical giants Dow and DuPont too big to succeed? That is the question for antitrust regulators. The companies say their products don’t compete head-to-head, but they face a tough regulatory climate.
George Mason University economics professor Donald Boudreaux said the merger should be permitted.
“No one knows—least of all government officials and judges—what is the optimal size of a firm in any industry,” Boudreaux said. “The only way to discover the optimal size—the size that best serves consumers’ needs over time—is to allow business to experiment.”
The proposed merger certainly has that element. As George Mason professor of finance Derek Horstmeyer explained, “The proposal to merge these two companies and then immediately split them into three separate companies—one focused on agriculture, one on materials and the last on chemical products—will create three very focused entities.”
Consumers could very well see price increases after the merger, Horstmeyer said.
“But if it does (raise prices),” Boudreaux said of the post-merged company, “the resulting excess profits will attract new entrants into the chemical industry and inspire other existing chemical producers—such as Germany’s BASF—to increase their presence in the markets dominated by the merged Dow-DuPont.”
Donald J. Boudreaux, professor of economics in the College of Humanities and Social Sciences, has a PhD in economics from Auburn University and a law degree from the University of Virginia, and is an expert on international trade and antitrust law. 703-993-1157; firstname.lastname@example.org
Derek Horstmeyer, professor of finance in the School of Business, has a PhD in finance and economics for the University of Southern California, and is an expert in mergers and acquisitions. 703-993-9761; email@example.com
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