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Efficiency Defence, Administrative Fuzziness, and Commitment in Merger Regulation

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Author Info
Andrei Medvedev () (Centre for Competition Policy, University of East Anglia)

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Abstract

This paper develops a signalling model to look at some effects of the inclusion of an efficiency defence in merger regulation. By incorporating Type I and Type II errors into the antitrust agency's pay-off function approval probabilities are endogenized. The agency can choose to use a fuzzy approval rule (mixed strategies) after observing a double signal (produced evidence and the way it has been produced) as a tool to (partially) separate different merger types by changing approval probabilities and, consequently, firms' expected payoffs from a merger. The separation leads to a lower value of the expected mistake by the agency. If the agency can commit to certain policies, then a fuzzy approval rule is preferred under a wide range of parameters.

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Publisher Info
Paper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number 06-8.

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Length: 27 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:ccp:wpaper:wp06-08

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Related research
Keywords: Merger regulation; efficiency defence; signalling; commitment;

Find related papers by JEL classification:
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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This page was last updated on 2009-10-30.

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