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The Effects of Remedies on Merger Activity in Oligopoly

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  • Wey, Christian
  • Dertwinkel-Kalt, Markus

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 profitable and acceptable mergers, while divestitures to an entrant firm 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 and we identify instances so that a remedy rule induces strictly price-decreasing mergers. Finally, under incomplete information an effcient merger type is to be doomed to "overshoot" with its divestiture proposal in a pooling equilibrium which is also possible under separation.

Suggested Citation

  • Wey, Christian & Dertwinkel-Kalt, Markus, 2013. "The Effects of Remedies on Merger Activity in Oligopoly," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79888, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc13:79888
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    Cited by:

    1. Clougherty, Joseph A. & Duso, Tomaso & Lee, Miyu & Seldeslachts, Jo, 2016. "Effective European Antitrust : Does EC Merger Policy Generate Deterrence?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 54(4), pages 1884-1903.
    2. Markus Dertwinkel-Kalt & Christian Wey, 2016. "Merger Remedies in Oligopoly under a Consumer Welfare Standard," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 32(1), pages 150-179.
    3. Dertwinkel-Kalt, Markus & Wey, Christian, 2014. "Remedies vs. Extreme Options in Merger Control," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100397, Verein für Socialpolitik / German Economic Association.
    4. Markus Dertwinkel-Kalt & Christian Wey, 2021. "Evidence Production in Merger Control: The Role of Remedies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(1), pages 1-12, August.

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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