The Failing Firm Defense
AbstractThis paper evaluates the welfare consequences of the failing firm defense (FFD) in the EU and U.S. merger laws. To this end, I combine an oligopoly model with an 'endogenous valuations' auction model. The FFD is shown to work reasonably well for consumers unless small firms are too small. The FFD may, however, lead to total surplus losses, due to a 'least danger to competition' (LDC) condition which favors small, and thus possibly inefficient, firms. It is also shown that, in a multi-firm setting, the FFD increases the incentive for predation only when the assets are industry-specific. Copyright Blackwell Publishing Ltd. 2005.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The Journal of Industrial Economics.
Volume (Year): 53 (2005)
Issue (Month): 2 (06)
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- Alessandro Fedele & Massimo Tognoni, 2006.
"Failing Firm Defense with Entry Deterrence,"
20061002, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica, revised Oct 2006.
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- Norbäck, Pehr-Johan & Persson, Lars, 2007. "Globalization and Profitability of Cross-border Mergers & Acquisitions," CEPR Discussion Papers 6102, C.E.P.R. Discussion Papers.
- Beschorner, Patrick Frank Ernst, 2008. "Do Consumers Benefit from Concentration in the New Economy? A Review of Google's Mergers, Acquisitions, and Arrangements," ZEW Discussion Papers 08-121, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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