Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index

35 Pages Posted: 17 Jul 2006 Last revised: 30 Mar 2011

See all articles by Maarten Pieter Schinkel

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Marie Goppelsroeder

University of Amsterdam

Jan Tuinstra

University of Amsterdam - Department of Quantitative Economics (KE); Tinbergen Institute

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Abstract

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

Schinkel, Maarten Pieter and Goppelsroeder, Marie and Tuinstra, Jan, Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index. Journal of Industrial Economics, Vol. LVI, No. 4, pp. 778-808, 2008; Amsterdam Center for Law & Economics Working Paper No. 2006-10. Available at SSRN: https://ssrn.com/abstract=916556

Maarten Pieter Schinkel (Contact Author)

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Marie Goppelsroeder

University of Amsterdam ( email )

Department of Economics (ACLE)
Roetersstraat 11
Amsterdaam, 1018WB
Netherlands
+31-20-525-5052 (Phone)
+31-20-525-5318 (Fax)

Jan Tuinstra

University of Amsterdam - Department of Quantitative Economics (KE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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