Incentive Contracts as Merger Remedies
12 Pages Posted: 21 Oct 2005
Date Written: October 2005
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
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