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Dynamic Merger Review

  • Volker Nocke
  • Michael D. Whinston

We analyze the optimal dynamic policy of an antitrust authority toward horizontal mergers when merger proposals are endogenous and occur over time. Approving a currently proposed merger may affect the profitability and welfare effects of potential future mergers, whose characteristics may not yet be known. We identify conditions under which discounted expected consumer surplus is maximized by using a completely myopic merger review policy that approves a merger if and only if it does not lower consumer surplus given the current market structure. We also discuss a number of extensions as well as factors that undermine the optimality of myopic merger review policies.

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File URL: http://www.jstor.org/stable/pdfplus/10.1086/658161
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File URL: http://www.jstor.org/stable/full/10.1086/658161
Download Restriction: Access to the online full text or PDF requires a subscription.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 118 (2010)
Issue (Month): 6 ()
Pages: 1201 - 1251

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Handle: RePEc:ucp:jpolec:doi:10.1086/658161
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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  1. Nilssen, Tore & Sorgard, Lars, 1998. "Sequential horizontal mergers," European Economic Review, Elsevier, vol. 42(9), pages 1683-1702, November.
  2. Boyan Jovanovic & Peter L. Rousseau, 2008. "Mergers as Reallocation," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 765-776, November.
  3. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
  4. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," American Economic Review, American Economic Association, vol. 92(2), pages 198-204, May.
  5. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  6. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(2), pages 189-210, 06.
  7. Motta, Massimo & Vasconcelos, Helder, 2005. "Efficiency gains and myopic antitrust authority in a dynamic merger game," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 777-801, December.
  8. Ramon Fauli-Oller, 2000. "Takeover Waves," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 189-210, 06.
  9. Matsushima, Noriaki, 2001. "Horizontal Mergers and Merger Waves in a Location Model," Australian Economic Papers, Wiley Blackwell, vol. 40(3), pages 263-86, September.
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