Incentive Contracts as Merger Remedies

12 Pages Posted: 21 Oct 2005  

Gregory J. Werden

U.S. Department of Justice - Antitrust Division

Luke Froeb

Vanderbilt University - Strategy and Business Economics

Steven Tschantz

Vanderbilt University - Department of Mathematics

Date Written: October 2005

Abstract

Contrary to the suggestion of Williamson (1968), a merger enhancing total social welfare through the creation of substantial efficiencies nevertheless may violate current antitrust law in the United States, which considers only the effects of mergers on consumers. To avoid violating antitrust laws, merging firms could contract with a third party in a manner that offsets the incentive created by a merger to raise price or restrict output.

Keywords: antitrust, merger, Nash Equilibrium, merger remedy, oligopoly

Suggested Citation

Werden, Gregory J. and Froeb, Luke and Tschantz, Steven, Incentive Contracts as Merger Remedies (October 2005). Vanderbilt Law and Economics Research Paper No. 05-27. Available at SSRN: https://ssrn.com/abstract=824484 or http://dx.doi.org/10.2139/ssrn.824484

Gregory J. Werden

U.S. Department of Justice - Antitrust Division ( email )

450 Fifth Street, NW
9th Floor
Washington, DC 20530
United States
202-307-6366 (Phone)

Luke M. Froeb (Contact Author)

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States
615-322-9057 (Phone)
615-343-7177 (Fax)

Steven T. Tschantz

Vanderbilt University - Department of Mathematics ( email )

Nashville, TN 37240
United States

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