Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools

WZB, Markets and Political Economy Working Paper No. SPII 2007-02

51 Pages Posted: 23 Oct 2007 Last revised: 12 Feb 2008

See all articles by Jo Seldeslachts

Jo Seldeslachts

KU Leuven - Faculty of Business and Economics (FEB); German Institute for Economic Research (DIW Berlin)

Joseph A. Clougherty

University of Illinois at Urbana-Champaign

Pedro P. Barros

Universidade Nova de Lisboa

Multiple version iconThere are 2 versions of this paper

Date Written: February 2007

Abstract

Antitrust policy involves not just the regulation of anti-competitive behavior, but also an important deterrence effect. Neither scholars nor policymakers have fully researched the deterrence effects of merger policy tools, as they have been unable to empirically measure these effects. We consider the ability of different antitrust actions - Prohibitions, Remedies, and Monitorings - to deter firms from engaging in mergers. We employ cross-jurisdiction/pan-time data on merger policy to empirically estimate the impact of antitrust actions on future merger frequencies. We find merger prohibitions to lead to decreased merger notifications in subsequent periods, and remedies to weakly increase future merger notifications: in other words, prohibitions involve a deterrence effect but remedies do not.

Keywords: merger policy tools, deterrence effects, cross-section/time-series data

JEL Classification: L40, L49, K21

Suggested Citation

Seldeslachts, Jo and Clougherty, Joseph A. and Pita Barros, Pedro Luis, Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools (February 2007). WZB, Markets and Political Economy Working Paper No. SPII 2007-02. Available at SSRN: https://ssrn.com/abstract=1009135 or http://dx.doi.org/10.2139/ssrn.1009135

Jo Seldeslachts (Contact Author)

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Joseph A. Clougherty

University of Illinois at Urbana-Champaign ( email )

1206 S. Sixth Street
350 Wohlers Hall, MC-706
Champaign, IL 61820
United States

Pedro Luis Pita Barros

Universidade Nova de Lisboa ( email )

Campus de Campolide
Lisboa, 1099-032
Portugal
+351 21 383 3624 (Phone)
+351 21 388 6073 (Fax)

HOME PAGE: http://ppbarros.fe.unl.pt

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