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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. Duso, Thomas & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How Effective is European Merger Control?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 354, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. 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.
  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. 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.
  5. Volker Nocke & Michael D. Whinston, 2008. "Dynamic Merger Review," NBER Working Papers 14526, National Bureau of Economic Research, Inc.
  6. Joseph A. Clougherty & Jo Seldeslachts, 2011. "The Deterrence Effects of U.S. Merger Policy Instruments," Tinbergen Institute Discussion Papers 11-095/1, Tinbergen Institute.
  7. Spector, David, 2002. "Horizontal mergers, entry, and efficiency defences," CEPREMAP Working Papers (Couverture Orange) 0206, CEPREMAP.
  8. 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.
  9. Vasconcelos, Helder, 2007. "Efficiency Gains and Structural Remedies in Merger Control," CEPR Discussion Papers 6093, C.E.P.R. Discussion Papers.
  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.
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