Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index
35 Pages Posted: 17 Jul 2006 Last revised: 30 Mar 2011
In both US and EU merger control, merger-specific efficiencies are recognized as a possible defense for horizontal mergers that raise competition concerns. We introduce the Werden-Froeb-index (WFI) to assist in evaluating these efficiencies. The index measures the weighted average reduction in marginal costs required to restore pre-merger equilibrium prices and quantities after the (full or partial) merger is consummated. The WFI is well-defined, objective and robust, and has relatively low information requirements. We propose to use the index as a natural complement to concentration measures (such as the Hirschmann-Herfindahl-index) in the assessment of horizontal mergers.
Keywords: Merger control, efficiency defense, index, HHI
JEL Classification: L100, L400, C430
Suggested Citation: Suggested Citation