This paper considers merger control in a common agency framework where firms and their competitors can influence the antitrust agency and where transparency - while making lobbying less effective - also implies real resource costs. We examine the performance of two alternative standards that can be assigned to the antitrust agency in the presence of these regulatory failures. We find that under a welfare standard, lobbying leads to the clearance of relatively inefficient mergers that decrease welfare (i.e. there is a type II error). By contrast, under a consumer surplus standard the agency will ban relatively efficient mergers that would increase welfare (i.e. there is a type I error). Lobbying actually reduces the extent to which this occurs, albeit at a cost in terms of real resources. We also find that a consumer surplus standard is more attractive when mergers are large, when increasing the size of a merger greatly enhances industry profits, when there is little transparency, and when co-ordination costs amongst competitors are low.
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Find related papers by JEL classification: K20 - Law and Economics - - Regulation and Business Law - - - General L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
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Other versions:
Gene M. Grossman & Elhanan Helpman, 1992.
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[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Oliver Gürtler & Matthias Kräkel, 2006.
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Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2006.
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81, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
Other versions:
Tomaso Duso & Klaus Gugler & Burçin Yurtoglu, 2006.
"How Effective is European Merger Control?,"
CIG Working Papers
SP II 2006-12, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
[Downloadable!]
Other versions:
Tomaso Duso & Klaus Gugler & Burcin Yurtoglu, 2006.
"How Effective is European Merger Control?,"
Discussion Papers
153, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
[Downloadable!]
repec:bep:dewple:2006-1-1165 is not listed on IDEAS
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[Downloadable!]