Advanced Search
MyIDEAS: Login to save this paper or follow this series

Efficiency Gains from Mergers

Contents:

Author Info

  • Lars-Hendrik Röller
  • Johan Stennek
  • Frank Verboven

Abstract

The purpose of this discussion paper is to contribute to the analysis of two questions. Should a merger control system take into account efficiency gains from horizontal mergers, and balance these gains against the anti-competitive effects of mergers? If so, how should a system be designed to account for efficiency gains? The report is divided into five separate parts. The discussion paper is based on a report to the European Commission. To help answer the two questions we start with an extensive review of the relevant economic research, including both theoretical and empirical work. Next, we review the current practice in seven O.E.C.D. jurisdictions. Finally, we propose a merger control system, emphasizing the central role of informational limitations. Based on our conclusions from the empirical literature that efficiencies may need to be assessed on a case-by-case basis, we construct an information-economizing two-stage decision framework for evaluating mergers. In a first stage, notified mergers are assessed using routine tools with modest information requirements. Mergers that do not pass the first stage test are subject to further investigation, including an efficiency defence. ZUSAMMENFASSUNG - (Effizienzgewinne von Unternehmenszusammenschlüssen) Das Diskussionspapier leistet einen Beitrag zur Analyse von zwei wettbewerbspolitischen Fragen: Sollen im Rahmen der Fusionskontrolle Effizienzgewinne horizontaler Zusammenschlüsse berücksichtigt und den wettbewerbsbeschränkenden Wirkungen gegenübergestellt werden? Und, falls ja, wie sollten diese Effizienzgewinne im Kontrollprozess berücksichtigt werden? Grundlage für das Diskussionspapier ist ein Gutachten, das für die Europäische Kommission erstellt wurde. Die Untersuchung beginnt mit einer ausführlichen Darstellung der relevanten ökonomischen Forschung. Dabei werden sowohl theoretische als auch empirische Arbeiten berücksichtigt. Anschließend wird die gegenwärtige Praxis der Fusionskontrolle in sieben OECD-Ländern erörtert. Auf Basis der gewonnenen Erkenntnisse wird schließlich ein Verfahren für die Analyse von Unternehmenszusammenschlüssen vorgeschlagen. Das vorgeschlagene Verfahren greift die empirische Erkenntnis auf, daß Effizienzgewinne nicht generell aber fallweise von Bedeutung sein können. Es wird ein zweistufiger Entscheidungsprozess entwickelt, um einerseits die Informationskosten gering zu halten und andererseits die notwendige Präzision des Kontrollverfahrens zu sichern. In der ersten Stufe des Verfahrens prüfen die Wettbewerbsbehörden angemeldete Fusionen anhand von Standardkriterien mit geringen Informationsanforderungen. Nur solche Fusionen, die diesen Test nicht bestehen, werden dann in einer zweiten Stufe einer genaueren Analyse unterzogen, bei der Effizienzgewinne berücksichtigt werden.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://skylla.wz-berlin.de/pdf/2000/iv00-09.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 00-09.

as in new window
Length: 144 pages
Date of creation: Aug 2000
Date of revision:
Handle: RePEc:wzb:wzebiv:fsiv00-09

Contact details of provider:
Postal: Reichpietschufer 50, 10785 Berlin, Germany
Phone: (++49)(30) 25491-441
Fax: (++49)(30) 25491-442
Email:
Web page: http://www.wzb.eu/mp/wiw/default.en.htm
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Lamm, R McFall, 1981. "Prices and Concentration in the Food Retailing Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 30(1), pages 67-78, September.
  2. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
  3. Allen N. Berger & David B. Humphrey, 1992. "Megamergers in banking and the use of cost efficiency as an antitrust defense," Finance and Economics Discussion Series 203, Board of Governors of the Federal Reserve System (U.S.).
  4. Mark Bagnoli, Barton L. Lipman, 1988. "Successful Takeovers without Exclusion," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 89-110.
  5. Kamien, Morton I & Zang, Israel, 1990. "The Limits of Monopolization through Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 465-99, May.
  6. Lichtenberg, Frank R., 1992. "Industrial de-diversification and its consequences for productivity," Journal of Economic Behavior & Organization, Elsevier, vol. 18(3), pages 427-438, August.
  7. Salop, Steven C, 1987. "Symposium on Mergers and Antitrust," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 3-12, Fall.
  8. Bresnahan, Timothy F & Reiss, Peter C, 1990. "Entry in Monopoly Markets," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 531-53, October.
  9. Ikeda, Katsuhiko & Doi, Noriyuki, 1983. "The Performances of Merging Firms in Japanese Manufacturing Industry: 1964-75," Journal of Industrial Economics, Wiley Blackwell, vol. 31(3), pages 257-66, March.
  10. Gokhale, Jagadeesh & Groshen, Erica L & Neumark, David, 1995. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 470-85, August.
  11. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  12. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, vol. 80(2), pages 400-404, May.
  13. Gal-Or, Esther, 1988. "The Informational Advantages or Disadvantages of Horizontal Mergers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(4), pages 639-61, November.
  14. Reinganum, Jennifer F, 1983. "Uncertain Innovation and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 73(4), pages 741-48, September.
  15. Berkovitch, Elazar & Narayanan, M. P., 1993. "Motives for Takeovers: An Empirical Investigation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(03), pages 347-362, September.
  16. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  17. Panzar, John C., 1989. "Technological determinants of firm and industry structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 1, pages 3-59 Elsevier.
  18. Barros, Pedro P. & Cabral, Luis, 1994. "Merger policy in open economies," European Economic Review, Elsevier, vol. 38(5), pages 1041-1055, May.
  19. Bettendorf, L. & Verboven, F.L., 1998. "Competition and the Dutch Coffee Market," Discussion Paper 1998-10, Tilburg University, Center for Economic Research.
  20. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
  21. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
  22. Marvel, Howard P, 1978. "Competition and Price Levels in the Retail Gasoline Market," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 252-58, May.
  23. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  24. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
  25. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
  26. repec:ant:wpaper:1999018 is not listed on IDEAS
  27. Brander, James A & Spencer, Barbara J, 1989. "Moral Hazard and Limited Liability: Implications for the Theory of the Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 833-49, November.
  28. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1996. "The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function," Center for Financial Institutions Working Papers 96-03, Wharton School Center for Financial Institutions, University of Pennsylvania.
  29. David Neumark & Steven A. Sharpe, 1994. "Rents and quasi-rents in the wage structure: evidence from hostile takeovers," Finance and Economics Discussion Series 94-6, Board of Governors of the Federal Reserve System (U.S.).
  30. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
  31. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  32. Lever, Jeremy, 1999. "The development of British competition law: a complete overhaul and harmonization," Discussion Papers, Research Unit: Market Dynamics FS IV 99-4, Social Science Research Center Berlin (WZB).
  33. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-69, June.
  34. Sanford J. Grossman & Oliver D. Hart, 1982. "Corporate Financial Structure and Managerial Incentives," NBER Chapters, in: The Economics of Information and Uncertainty, pages 107-140 National Bureau of Economic Research, Inc.
  35. Baker, Jonathan B. & Bresnahan, Timothy F., 1988. "Estimating the residual demand curve facing a single firm," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 283-300.
  36. Verboven, Frank, 1995. "Corporate restructuring in a collusive oligopoly," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 335-354, September.
  37. Donald McFetridge, 1998. "Merger Enforcement under the Competition Act after Ten Years," Review of Industrial Organization, Springer, vol. 13(1), pages 25-56, April.
  38. Bradley, Michael & Desai, Anand & Kim, E. Han, 1988. "Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms," Journal of Financial Economics, Elsevier, vol. 21(1), pages 3-40, May.
  39. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 110.
  40. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 241-273, April.
  41. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-86, August.
  42. Feenstra, Robert C. & Gagnon, Joseph E. & Knetter, Michael M., 1996. "Market share and exchange rate pass-through in world automobile trade," Journal of International Economics, Elsevier, vol. 40(1-2), pages 187-207, February.
  43. Perry, Martin K., 1989. "Vertical integration: Determinants and effects," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 4, pages 183-255 Elsevier.
  44. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June.
  45. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  46. Brian E. Becker, 1995. "Union rents as a source of takeover gains among target shareholders," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(1), pages 3-19, October.
  47. James D. Reitzes & David T. Levy, 1995. "Price Discrimination and Mergers," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 427-36, May.
  48. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73, pages 351.
  49. Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
  50. Ajeyo Banerjee & E. Woodrow Eckard, 1998. "Are Mega-Mergers Anticompetitive? Evidence from the First Great Merger Wave," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 803-827, Winter.
  51. Houston, Joel F. & Ryngaert, Michael D., 1994. "The overall gains from large bank mergers," Journal of Banking & Finance, Elsevier, vol. 18(6), pages 1155-1176, December.
  52. DePrano, Michael E & Nugent, Jeffrey B, 1969. "Economies as an Antitrust Defense: Comment," American Economic Review, American Economic Association, vol. 59(5), pages 947-53, December.
  53. Kole, S.R. & Lenh, K., 1997. "Workforce Integration and the Dissipation of Value in Mergers: The Case of USAir's Acquisition of Piedmont Aviation," Papers 97-07, Rochester, Business - Financial Research and Policy Studies.
  54. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  55. Coate, Malcolm B & McChesney, Fred S, 1992. "Empirical Evidence on FTC Enforcement of the Merger Guidelines," Economic Inquiry, Western Economic Association International, vol. 30(2), pages 277-93, April.
  56. Besanko, David & Spulber, Daniel F, 1993. "Contested Mergers and Equilibrium Antitrust Policy," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(1), pages 1-29, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wzb:wzebiv:fsiv00-09. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Rontganger).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.