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Efficiency Gains And Structural Remedies In Merger Control

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  • HELDER VASCONCELOS

Abstract

This paper studies the role of structural remedies in merger control in a Cournot setting where (endogenous) mergers are motivated by prospective efficiency gains and must be submitted to an Antitrust Authority (AA) which might require partial divestiture for approval. Both positive and negative effects of merger remedies are identified. First, structural remedies create new merger opportunities to firms. Second, when divestitures are required, the AA over-fixes, i.e., goes beyond the recreation of the level of competition that existed prior to the transaction. Finally, by insisting in over-fixing, the AA may discourage firms to look for more efficient mergers, inducing a final outcome where consumers' surplus is lower than if divestitures couldn't be required. Overall, however, structural remedies are shown to be good: consumers' surplus ex-ante is higher with than without remedies.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

Volume (Year): 58 (2010)
Issue (Month): 4 (December)
Pages: 742-766

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Handle: RePEc:bla:jindec:v:58:y:2010:i:4:p:742-766

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References

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  1. Motta, Massimo & Vasconcelos, Helder, 2004. "Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game," CEPR Discussion Papers 4175, C.E.P.R. Discussion Papers.
  2. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  3. Luis M. B. Cabral, 2001. "Horizontal Mergers With Free-Entry: Why Cost Efficiencies May Be a Weak Defense and Asset Sales a Poor Remedy," Working Papers 01-05, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Morton I. Kamien & Israel Zang, 1988. "The Limits of Monopolization Through Acquisition," Discussion Papers 802, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Farrell, Joseph & Shapiro, Carl, 2000. "Scale Economies and Synergies in Horizontal Merger Analysis," Competition Policy Center, Working Paper Series qt8v1500b8, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  6. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
  7. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September.
  8. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  9. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  10. Petri Lehto & Mihkel M. Tombak, 1997. "Consolidations and the Sequence of Acquisitions to Monopoly," CIG Working Papers FS IV 97-22, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  11. Andrei Medvedev, 2007. "Structural Remedies in Merger Regulation in a Cournot Framework," Working Papers 07-16, Centre for Competition Policy, University of East Anglia.
  12. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, December.
  13. Farrell, Joseph, 2003. "Negotiation and Merger Remedies: Some Problems," Competition Policy Center, Working Paper Series qt9p72k8fn, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  14. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  15. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
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Citations

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Cited by:
  1. Patrice Bougette, 2011. "Négociation d'engagements en matière de concentrations : une perspective d'économiste," Post-Print halshs-00580669, HAL.
  2. Dertwinkel-Kalt, Markus & Wey, Christian, 2012. "The effects of remedies on merger activity in oligopoly," DICE Discussion Papers 81, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  3. Cosnita-Langlais, Andreea & Tropeano, Jean-Philippe, 2012. "Do remedies affect the efficiency defense? An optimal merger-control analysis," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 58-66.
  4. Christian Steiner & Kai Hüschelrath & Jürgen Weigand, 2011. "Merger remedies involving restructuring costs in a Cournot framework," Empirica, Springer, vol. 38(3), pages 417-434, July.
  5. Wey, Christian & Dertwinkel-Kalt, Markus, 2013. "The Effects of Remedies on Merger Activity in Oligopoly," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79888, Verein für Socialpolitik / German Economic Association.

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