Dynamic Merger Review
University of Mannheim - Department of Economics
Michael D. Whinston
Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)
CEPR Discussion Paper No. DP7077
We analyze the optimal dynamic policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and occur over time. Approving a currently proposed merger will affect the profitability and welfare effects of potential future mergers, the characteristics of which may not yet be known to the antitrust authority. We show that, in many cases, this apparently difficult problem has a simple resolution: an antitrust authority can maximize discounted consumer surplus by using a completely myopic merger review policy that approves a merger today if and only if it does not lower consumer surplus given the current market structure.
Number of Pages in PDF File: 53
Keywords: efficiency gain, horizontal merger, market power, merger policy, oligopoly
JEL Classification: D43, L13, L41
Date posted: February 17, 2009
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