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The effects of remedies on merger activity in oligopoly

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  • Dertwinkel-Kalt, Markus
  • Wey, Christian

Abstract

We analyze the effects of structural remedies on merger activity in a Cournot oligopoly when the antitrust agency applies a consumer surplus standard. Remedies increase the scope for pro�table and acceptable mergers, while divestitures to an entrant �rm are most effective in this regard. Remedial divestitures are most attractive from a social welfare point of view, when the merging parties can extract the entire gains associated with the asset sale. We also show that the merging parties have strong incentives to search for the most efficient buyer. Finally, we identify instances so that a remedy rule induces strictly price-decreasing mergers. --

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Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 81.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:81

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Keywords: Remedies; Divestiture; Merger Control; Oligopoly; Synergies;

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  1. Spector, David, 2002. "Horizontal mergers, entry, and efficiency defences," CEPREMAP Working Papers (Couverture Orange) 0206, CEPREMAP.
  2. Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Luis M. B. Cabral, 2001. "Horizontal Mergers With Free-Entry: Why Cost Efficiencies May Be a Weak Defense and Asset Sales a Poor Remedy," Working Papers 01-05, New York University, Leonard N. Stern School of Business, Department of Economics.
  4. Vasconcelos, Helder, 2007. "Efficiency Gains and Structural Remedies in Merger Control," CEPR Discussion Papers 6093, C.E.P.R. Discussion Papers.
  5. Volker Nocke & Michael D. Whinston, 2010. "Dynamic Merger Review," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1201 - 1251.
  6. Clougherty, Joseph A. & Seldeslachts, Jo, 2011. "The Deterrence Effects of U.S. Merger Policy Instruments," CEPR Discussion Papers 8482, C.E.P.R. Discussion Papers.
  7. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," DICE Discussion Papers 15, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  8. Thibaud Vergé, 2010. "Horizontal Mergers, Structural Remedies, And Consumer Welfare In A Cournot Oligopoly With Assets," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 723-741, December.
  9. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
  10. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-87, June.
  11. Joseph A. Clougherty & Jo Seldeslachts, 2011. "The Deterrence Effects of U.S. Merger Policy Instruments," Tinbergen Institute Discussion Papers 11-095/1, Tinbergen Institute.
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