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Do remedies affect the efficiency defense? An optimal merger-control analysis

  • Cosnita-Langlais, Andreea
  • Tropeano, Jean-Philippe

This paper examines the optimal use of remedies and the efficiency defense for merger control. We develop a framework in which merger efficiency gains are endogenously determined and are not observed by the Competition Authority. The possibility of an efficiency defense can push firms to design the merger better, leading to greater efficiency gains. Firms can also submit remedies to the Competition Authority: they interact with the efficiency defense, by reducing the firm's incentive to enhance efficiency. At the same time remedies improve the assessment of the merger, in particular by signaling the true level of efficiency gains. We ask to what extent it may be optimal to make use of both instruments simultaneously, and thus discuss the possibility that the Competition Agency refrain from using one of the instruments to try to improve overall merger-control performance.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 30 (2012)
Issue (Month): 1 ()
Pages: 58-66

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Handle: RePEc:eee:indorg:v:30:y:2012:i:1:p:58-66
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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  1. Barros, Pedro Pita & Clougherty, Joseph A. & Seldeslachts, Jo, 2007. "Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools," CEPR Discussion Papers 6437, C.E.P.R. Discussion Papers.
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  4. Banal-Estanol, Albert & Macho-Stadler, Ines & Seldeslachts, Jo, 2008. "Endogenous mergers and endogenous efficiency gains: The efficiency defence revisited," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 69-91, January.
  5. Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2009. "Settle for Now but Block for Tomorrow: The Deterrence Effects of Merger Policy Tools," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 607-634, 08.
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  7. Armstrong, Mark & Vickers, John, 2008. "A model of delegated project choice," MPRA Paper 8963, University Library of Munich, Germany.
  8. Albert Banal-Estañol & Jo Seldeslachts, 2009. "Merger failures," Economics Working Papers 1192, Department of Economics and Business, Universitat Pompeu Fabra.
    • Albert Banal-Estañol & Jo Seldeslachts, 2005. "Merger Failures," CIG Working Papers SP II 2005-09, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  9. Helder Vasconcelos, 2010. "Efficiency Gains And Structural Remedies In Merger Control," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 742-766, December.
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  11. Johan Lagerlöf & Paul Heidhues, 2002. "On the Desirability of an Efficiency Defense in Merger Control," CIG Working Papers FS IV 02-08, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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  18. Fabienne Ilzkovitz & Roderick Meiklejohn, 2003. "European Merger Control: Do We Need an Efficiency Defence?," Journal of Industry, Competition and Trade, Springer, vol. 3(1), pages 57-85, March.
  19. Yosha Oved, 1995. "Information Disclosure Costs and the Choice of Financing Source," Journal of Financial Intermediation, Elsevier, vol. 4(1), pages 3-20, January.
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