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Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game

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  • Motta, Massimo
  • Vasconcelos, Helder

Abstract

This Paper models a sequential merger formation game with endogenous efficiency gains in which every merger has to be submitted for approval to the Antitrust Authority (AA). Two different types of AA are studied: first, a myopic AA, which judges a given merger without considering that subsequent mergers may occur; and, second, a forward-looking AA, which anticipates the ultimate market structure a given merger will lead to. By contrasting the decisions of these two types of AA, merger policy implications can be drawn. In particular, the efficiency offence argument does not find any justification under a forward-looking AA.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4175.

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Date of creation: Jan 2004
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Handle: RePEc:cpr:ceprdp:4175

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Keywords: efficiency offence; endogenous mergers; foresight;

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  1. Morton I. Kamien & Israel Zang, 1987. "The Limits of Monopolization Through Acquisition," Discussion Papers 754, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Horn, Henrik & Persson, Lars, 1996. "Endogenous Mergers in Concentrated Markets," CEPR Discussion Papers 1544, C.E.P.R. Discussion Papers.
  3. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  4. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
  5. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, December.
  6. Nilssen, T. & Sogard, L., 1995. "Sequential Horizontal Mergers," Papers 04-95, Norwegian School of Economics and Business Administration-.
  7. Farrell, Joseph & Shapiro, Carl, 2000. "Scale Economies and Synergies in Horizontal Merger Analysis," Department of Economics, Working Paper Series qt96z174x1, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  8. Damien Neven, 2002. "Discrepancies Between Markets and Regulators: an Analysis of the First ten Years of EU Merger Control," IHEID Working Papers 10-2002, Economics Section, The Graduate Institute of International Studies.
  9. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  10. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  11. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
  12. 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.
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