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Dynamic Merger Review

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  • Volker Nocke
  • Michael D. Whinston

Abstract

We analyze the optimal dynamic policy of an antitrust authority toward horizontal mergers when merger proposals are endogenous and occur over time. Approving a currently proposed merger may affect the profitability and welfare effects of potential future mergers, whose characteristics may not yet be known. We identify conditions under which discounted expected consumer surplus is maximized by using a completely myopic merger review policy that approves a merger if and only if it does not lower consumer surplus given the current market structure. We also discuss a number of extensions as well as factors that undermine the optimality of myopic merger review policies.

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File URL: http://www.jstor.org/stable/pdfplus/10.1086/658161
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File URL: http://www.jstor.org/stable/full/10.1086/658161
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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 118 (2010)
Issue (Month): 6 ()
Pages: 1201 - 1251

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Handle: RePEc:ucp:jpolec:doi:10.1086/658161

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References

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  1. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  2. Nilssen, T. & Sogard, L., 1995. "Sequential Horizontal Mergers," Papers 04-95, Norwegian School of Economics and Business Administration-.
  3. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  4. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," NBER Working Papers 8740, National Bureau of Economic Research, Inc.
  5. Boyan Jovanovic & Peter L. Rousseau, 2002. "Mergers as Reallocation," NBER Working Papers 9279, National Bureau of Economic Research, Inc.
  6. 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.
  7. Matsushima, Noriaki, 2001. "Horizontal Mergers and Merger Waves in a Location Model," Australian Economic Papers, Wiley Blackwell, vol. 40(3), pages 263-86, September.
  8. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
  9. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
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Citations

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Cited by:
  1. Jovanovic, Dragan, 2013. "Mergers, managerial incentives, and efficiencies," DICE Discussion Papers 88, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  2. Pehr-Johan Norbäck & Lars Persson & Joacim Tag, 2013. "Buying to Sell: Private Equity Buyouts and Industrial Restructuring," CESifo Working Paper Series 4338, CESifo Group Munich.
  3. Aviv Nevo & Michael D. Whinston, 2010. "Taking the Dogma out of Econometrics: Structural Modeling and Credible Inference," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 69-82, Spring.
  4. Ding, Wei & Fan, Cuihong & Wolfstetter, Elmar G., 2013. "Horizontal mergers with synergies: Cash vs. profit-share auctions," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 382-391.
  5. Christian, Michel, 2013. "Identification and Estimation of Intra-Firm and Industry Competition via Ownership Change," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 409, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  6. Che, XiaoGang & Humphreys, Brad, 2012. "Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America," Working Papers 2012-23, University of Alberta, Department of Economics.
  7. Jovanovic, Dragan & Wey, Christian, 2012. "An equilibrium analysis of efficiency gains from mergers," DICE Discussion Papers 64, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  8. Gangopadhyay, Partha, 2014. "Dynamics of mergers, bifurcation and chaos: A new framework," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 403(C), pages 293-307.
  9. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers 527, Universidade do Porto, Faculdade de Economia do Porto.
  10. Michel, Christian, 2013. "Identification and Estimation of Intra-Firm and Industry Competition via Ownership Change," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80488, Verein für Socialpolitik / German Economic Association.
  11. Davis, Peter, 2011. "On the role of empirical industrial organization in competition policy," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 323-328, May.
  12. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
  13. Jovanovic, Dragan & Wey, Christian, 2013. "Passive partial ownership, sneaky takeover, and merger control," DICE Discussion Papers 102, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  14. 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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