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Dynamic Merger Review

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  • Nocke, Volker
  • Whinston, Michael

Abstract

We analyze the optimal dynamic policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and occur over time. Approving a currently proposed merger will affect the profitability and welfare effects of potential future mergers, the characteristics of which may not yet be known to the antitrust authority. We show that, in many cases, this apparently difficult problem has a simple resolution: an antitrust authority can maximize discounted consumer surplus by using a completely myopic merger review policy that approves a merger today if and only if it does not lower consumer surplus given the current market structure.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7077.

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Date of creation: Dec 2008
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Handle: RePEc:cpr:ceprdp:7077

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Related research

Keywords: efficiency gain; horizontal merger; market power; merger policy; oligopoly;

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References

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  1. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  2. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  3. Nilssen, T. & Sorgard, L., 1995. "Sequential Horizontal Mergers," Memorandum 30/1995, Oslo University, Department of Economics.
  4. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," American Economic Review, American Economic Association, vol. 92(2), pages 198-204, May.
  5. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  6. Motta, Massimo & Vasconcelos, Helder, 2005. "Efficiency gains and myopic antitrust authority in a dynamic merger game," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 777-801, December.
  7. Boyan Jovanovic & Peter L. Rousseau, 2002. "Mergers as Reallocation," NBER Working Papers 9279, National Bureau of Economic Research, Inc.
  8. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
  9. Matsushima, Noriaki, 2001. "Horizontal Mergers and Merger Waves in a Location Model," Australian Economic Papers, Wiley Blackwell, vol. 40(3), pages 263-86, September.
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Citations

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Cited by:
  1. 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.
  2. 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.
  3. 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.
  4. 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).
  5. 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.
  6. 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.
  7. 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.
  8. 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).
  9. 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.
  10. Shapiro, Carl & Farrell, Joseph, 2008. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," Department of Economics, Working Paper Series qt35c5f846, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  11. Jovanovic, Dragan, 2013. "Mergers, managerial incentives, and efficiencies," DICE Discussion Papers 88, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  12. 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).
  13. 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.
  14. 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.

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