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The efficiencies defence in merger cases: implications of alternative standards


  • Lin Bian


We compare alternative interpretations of the efficiencies defence, provided under Canadian competition law, for mergers found likely to lessen competition substantially. We find the respective percentage reductions in long-run marginal cost required for a profitable merger to satisfy the total surplus, price, and two weighted surplus standards, given pre-merger market structure. We find that when efficiency spillovers are low and markets are concentrated, the cost reduction required to satisfy the price standard is over four times higher than is required for a profitable, total-surplus-increasing merger and the cost reductions required to satisfy the weighted surplus standards are nearly twice as high.

Suggested Citation

  • Lin Bian, 2000. "The efficiencies defence in merger cases: implications of alternative standards," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 297-318, May.
  • Handle: RePEc:cje:issued:v:33:y:2000:i:2:p:297-318

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    References listed on IDEAS

    1. John F. Helliwell, 1984. "Stagflation and Productivity Decline in Canada, 1974-82," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 191-216, May.
    2. Grady, Patrick, 1985. "The state of the art in Canadian macroeconomic modelling," MPRA Paper 19474, University Library of Munich, Germany.
    3. Freedman, C, 1983. "Financial Innovation in Canada: Causes and Consequences," American Economic Review, American Economic Association, vol. 73(2), pages 101-106, May.
    4. Neil Bruce & Douglas D. Purvis, 1983. "Fiscal Discipline and Rules for Controlling the Deficit: Some Unpleasant Keynesian Arithmetic," Working Papers 536, Queen's University, Department of Economics.
    5. Willem H. Buiter, 1983. "Measurement of the Public Sector Deficit and Its Implications for Policy Evaluation and Design (Mesure du déficit du secteur public et ses implications pour l'évaluation et l'élaboration de la poli," IMF Staff Papers, Palgrave Macmillan, vol. 30(2), pages 306-349, June.
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    Cited by:

    1. Jens Prüfer, 2011. "Competition And Mergers Among Nonprofits," Journal of Competition Law and Economics, Oxford University Press, vol. 7(1), pages 69-92.
    2. Jarig Sinderen & Ron Kemp, 2008. "The Economic Effect Of Competition Law Enforcement: The Case Of The Netherlands," De Economist, Springer, vol. 156(4), pages 365-385, December.
    3. Rigoberto A. López & Elena López & Carmen Liron-Espana, 2009. "When is concentration beneficial? Evidence from U.S. manufacturing," Alcamentos 0901, Universidad de Alcalá, Departamento de Economía..
    4. Rigoberto Lopez & Elena Lopez & Carmen Lirón-España, 2014. "Who Benefits from Industrial Concentration? Evidence from U.S. Manufacturing," Journal of Industry, Competition and Trade, Springer, vol. 14(3), pages 303-317, September.
    5. Joseph Clougherty & Anming Zhang, 2005. "Export orientation and domestic merger policy: theory and some empirical evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 778-806, August.

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