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Merger settlement as a screening device

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  • Juwon Kwak

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Abstract

This article presents an economic model of judicial settlement in an asymmetric information setting to analyze the merger settlement between merging firms and a competition authority. The model analyzes how the competition authority may use the settlement process to screen out efficient mergers from inefficient ones. Because of the self-selection among merging firms, efficient mergers may be litigated in court, whereas inefficient mergers may be settled before going to trial. We further analyze the role and the effect of the second request in a merger settlement. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Juwon Kwak, 2013. "Merger settlement as a screening device," European Journal of Law and Economics, Springer, vol. 36(3), pages 523-540, December.
  • Handle: RePEc:kap:ejlwec:v:36:y:2013:i:3:p:523-540
    DOI: 10.1007/s10657-012-9330-7
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    File URL: http://hdl.handle.net/10.1007/s10657-012-9330-7
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    References listed on IDEAS

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    1. Lagerlof, Johan N.M. & Heidhues, Paul, 2005. "On the desirability of an efficiency defense in merger control," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 803-827, December.
    2. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn.
    3. Robert W. Crandall & Clifford Winston, 2005. "Does antitrust policy improve consumer welfare? Assessing the evidence," Chapters,in: Governments, Competition and Utility Regulation, chapter 2 Edward Elgar Publishing.
    4. Cosnita, Andreea & Tropeano, Jean-Philippe, 2009. "Negotiating remedies: Revealing the merger efficiency gains," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 188-196, March.
    5. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-1097, September.
    6. Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer.
    7. William M. Landes, 1974. "An Economic Analysis of the Courts," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 164-214 National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Chopard, Bertrand & Cortade, Thomas & Cosnita-Langlais, Andreea, 2015. "Success and failure of bargaining in merger control: The case of asset divestitures," Economic Modelling, Elsevier, vol. 49(C), pages 254-259.

    More about this item

    Keywords

    Merger settlement; Hart–Scott–Rodino Act; Merger Regulation 4064/89; Second request; L41; K21; K41; K42;

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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