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How much efficiency gains and price reductions for an efficiency defense? 'Quanto Basta'

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  • Fabrizi, Simona
  • Lippert, Steffen

Abstract

Potential efficiency gains due to a merger can be used by competition authorities to judge upon proposed mergers. In a world where agents’ efforts, observable or unobservable, affect the success of a production cost reducing project that may be conducted as a stand-alone firm or in a merger, we characterize the merger decision and the type of errors a competition authority may make when it relies on an efficiency defense. In addition, we show that the occurrence of either type of errors is always smaller under the unobservable efforts assumption, than under the observable efforts one.

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Bibliographic Info

Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2004-04.

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Date of creation: Jan 2005
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Handle: RePEc:ehu:dfaeii:200404

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Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Keywords: mergers; efficiency defense; moral hazard;

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Cited by:
  1. Marie Goppelsroeder & Maarten Pieter Schinkel & Jan Tuinstra, 2006. "Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index," Tinbergen Institute Discussion Papers, Tinbergen Institute 06-074/1, Tinbergen Institute.

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