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Merger Policy with Alternative Mergers and Efficiency Gains

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  • Razo, Carlos

    ()
    (Dept. of Economics, Stockholm University)

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    Abstract

    This paper models the behaviour of a Competition Authority (CA) that takes into consideration alternative future mergers when deciding whether to approve a current merger notification. The result is a more stringent CA that demands higher merger-efficiencies than the ones needed to restore pre-merger welfare, opening the possibility of challenging a merger that reduces prices. However, in the absence of entry and exit, a merger policy that considers alternative mergers is never consumer welfare decreasing. Additionally, CA’s merger-efficiencies expectations play an important role in the stance the CA adopts (tougher or laxer). Lastly, the paper suggests that even when alternative mergers could have positive effects on consumer welfare, CAs should exercise caution in adopting such merger policy given the significant side-effects.

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    File URL: http://www2.ne.su.se/paper/wp04_09.pdf
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    Bibliographic Info

    Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2004:9.

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    Length: 24 pages
    Date of creation: 20 Aug 2004
    Date of revision:
    Handle: RePEc:hhs:sunrpe:2004_0009

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    Related research

    Keywords: competition policy; mergers; efficiency gains;

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