Simulating Partial Asset Divestitures to 'Fix' Mergers
AbstractIn this paper, we apply and extend merger simulation methodology to analyze the effectiveness of partial divestitures as a 'fix' to remedy the possible anticompetitive effects of horizontal mergers. Typically, antitrust agencies require merging firms to divest assets so that the status quo before the merger is restored, that is, they favor a 'full divestiture'. We focus on the effectiveness of a partial divestiture as an antitrust remedy (where a subset of products owned by the merging firms is spun off). Although this is not the type of full divestiture favored by antitrust agencies, we argue here that a partial divestiture could leave consumers better off after the merger than they were before - under certain conditions. Using a real-world example, we show how divesting a relatively close substitute creates competition that offsets the anticompetitive effects of combining products that are relatively distant substitutes. This result stands even when the divestee is moderately inefficient.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.
Volume (Year): 7 (2000)
Issue (Month): 2 ()
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 407-26, October.
- Werden, G.J. & G.J. & Froeb, L.M., 1995. "Simulation as an Alternative to Structural Merger Policy in Differentiated Products Industries," Papers 95-02, U.S. Department of Justice - Antitrust Division.
- Vivienne Pham & David Prentice, 2013. "A Random Coefficients Logit Analysis of the Counterfactual: A Merger and Divestiture in the Australian Cigarette Industry," Working Papers 2013.04, School of Economics, La Trobe University.
- Vivienne Pham & David Prentice, 2010.
"An empirical Analysis of the Counter-factual: A Merger and Divestiture in the Australian Cigarette Industry,"
2010.08, School of Economics, La Trobe University.
- Pham, Vivienne & Prentice, David, 2010. "An empirical analysis of the counterfactual: a merger and divestiture in the Australian cigarette industry," MPRA Paper 26713, University Library of Munich, Germany.
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