ABSTRACT
The acquired wisdom produced by the enormous industrial organization literature on mergers and cartels is, quite obviously, that mergers should be subject to strict regulation, as any increase in the degree of concentration of an industry curtails consumer surplus and also welfare (if the associated increase in industry profits is not large enough to compensate for the first effect), while cartels should be prohibited sic et simpliciter. This is indeed the spirit incorporated in antitrust laws all over the world. However, if one inserts environmental considerations into the general picture, things (and our appraisal thereof ) may change in a non-negligible way, since shrinking industry output in one way or another in fact reduces the pressure on the environment of emissions, and contributes to preserving the stock of natural resources. Therefore, a priori our intuitive interpretation of this particular facet of the interplay between market power and the environment is characterized by some degree of ambiguity, to the extent that the static inefficiency usually attributed tomarket power (andmeasured by the size of price-costmargins) might yield, in compensation for the unavoidable decrease in consumer surplus, a form of dynamic efficiency in terms of the preservation of the environment.
