Efficiency Gains and Structural Remedies in Merger Control
Universidade do Porto - Faculdade de Economia (FEP)
December 24, 2010
The Journal of Industrial Economics, Vol. 58, Issue 4, pp. 742-766, 2010
This paper studies the role of structural remedies in merger control in a Cournot setting where (endogenous) mergers are motivated by prospective efficiency gains and must be submitted to an Antitrust Authority (AA) which might require partial divestiture for approval. From a merger policy perspective, this paper's main contribution is two-fold. First, it shows that if mergers do not involve all firms in the industry, then merger remedies help the AA to increase consumer surplus only if assets are divested to competitors already in the market. Second, it presents a model which clarifies that there can only exist social costs to over-fixing the anticompetitive effects of a merger if merger review policy treats mergers as one-time events. When a more dynamic view is taken of sequential merger review, then there can never be an over-fixing problem. In this case, however, remedies are shown to be needed to make myopic merger review optimal.
Number of Pages in PDF File: 25
Keywords: Endogenous mergers, Efficiency gains, Merger review policy
JEL Classification: D43, L13, L41, L51
Date posted: December 30, 2010
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