IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v65y2013i2p567-593.html

Can the failing firm defence rule be counterproductive?

Author

Listed:
  • Helder Vasconcelos

Abstract

The present paper investigates the role of the failing firm defence (FFD) concept in the merger control process within a Cournot setting where (i) endogenous mergers are motivated by prospective efficiency gains and (ii) mergers must be submitted to an antitrust authority that might demand partial divestiture for approval. The findings show that when the FFD concept is one of the tools available for controlling the merger process, firms can strategically embark on a merger that makes other firms fail and then buy out the exiting outsider firm(s), thereby leading to the monopolization of the industry. This implies that in some circumstances, a consumer--surplus--maximizing market structure cannot be achieved if the FFD concept is available, whereas it can if the FFD concept is ruled out. Copyright 2013 Oxford University Press 2012 All rights reserved, Oxford University Press.

Suggested Citation

  • Helder Vasconcelos, 2013. "Can the failing firm defence rule be counterproductive?," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 567-593, April.
    • Handle: RePEc:oup:oxecpp:v:65:y:2013:i:2:p:567-593
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gps034
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michele Bisceglia & Jorge Padilla & Joe Perkins & Salvatore Piccolo, 2024. "Optimal Exit Policy with Uncertain Demand," Journal of Industrial Economics, Wiley Blackwell, vol. 72(1), pages 516-547, March.
    2. Bernard Franck & Nicolas Le Pape, 2020. "The limited liability effect: Implications for anticompetitive horizontal mergers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 2082-2102, December.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:65:y:2013:i:2:p:567-593. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.