Merger policy, entry, and entrepreneurship

▸ We assess the impact of merger policy on entry and entrepreneurship. ▸ We show how more lenient merger policy may, by stimulating entry, increase welfare. ▸ We calculate the optimal merger policy in the form of a low, but positive, profitability threshold. ▸ Merger policy is compared with an entry subsidy. ▸ The implications of strategic firm behaviour for merger policy are examined.