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Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index

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  • Goppelsroeder, M.

    (Graduate Institute of International Studies, Geneva)

  • Schinkel, M.P.

    (Universiteit van Amsterdam)

  • Tuinstra, J.

    (Universiteit van Amsterdam)

Abstract

In both US and EU merger control, merger-specific efficiencies are recognized as a possible defense for horizontal mergers that raise competition concerns. We introduce the Werden-Froeb-index (WFI) to assist in evaluating these efficiencies. The index measures the average reduction in marginal costs required to restore pre-merger equilibrium prices and quantities after the merger is consummated. It has low information requirements and can deal with any number of firms in price- or quantity-competition merging fully or partially, and a large class of demand and cost functions. We show how the WFI complements Phase I merger inquiries as a screening mechanism.

Suggested Citation

  • Goppelsroeder, M. & Schinkel, M.P. & Tuinstra, J., 2006. "Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index," CeNDEF Working Papers 06-09, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    • Handle: RePEc:ams:ndfwpp:06-09
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    2. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Quantifying the coordinated effects of partial horizontal acquisitions," European Economic Review, Elsevier, vol. 110(C), pages 108-149.
    3. Baltzopoulos, Apostolos & Kim, Jaewon & Mandorff, Martin, 2015. "UPP Analysis in Five Recent Merger Cases," Konkurrensverket Working Paper Series in Law and Economics 2015:3, Konkurrensverket (Swedish Competition Authority).
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    5. Brito, Duarte & Osório, António & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Unilateral effects screens for partial horizontal acquisitions: The generalized HHI and GUPPI," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 127-189.
    6. Duso, Tomaso & Affeldt, Pauline & Gugler, Klaus & Piechucka, Joanna, 2021. "Assessing EU Merger Control through Compensating Efficiencies," CEPR Discussion Papers 16705, C.E.P.R. Discussion Papers.
    7. Andreea Cosnita-Langlais & Bjørn Olav Johansen & Lars Sorgard, 2018. "Upward Price Pressure in Two-Sided Markets: Incorporating Feedback Effects," Working Papers hal-04141797, HAL.
    8. repec:cdl:compol:qt8z51b1q8 is not listed on IDEAS
    9. Volker Nocke & Nicolas Schutz, 2025. "An Aggregative Games Approach to Merger Analysis in Multiproduct‐Firm Oligopoly," RAND Journal of Economics, RAND Corporation, vol. 56(3), pages 233-250, September.
    10. Maarten Pieter Schinkel & Lukas Toth, 2019. "Compensatory Public Good Provision by a Private Cartel," Tinbergen Institute Discussion Papers 19-086/VII, Tinbergen Institute.
    11. Emilie Dargaud, 2013. "Horizontal mergers, efficiency gains and remedies," European Journal of Law and Economics, Springer, vol. 36(2), pages 349-372, October.
    12. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2014. "Measuring unilateral effects in partial horizontal acquisitions," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 22-36.
    13. Onur A. Koska, 2019. "A consumer-surplus standard in foreign acquisitions, foreign direct investment, and welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(1), pages 149-179, February.
    14. Antonio Estache & Maxime Katté & Christophe Kieffer, 2022. "Simplifying the Measure of Concentration from Common Ownership: A Note," Working Papers ECARES 2022-19, ULB -- Universite Libre de Bruxelles.
    15. J.W.B. Bos & I. Chan & J. Kolari & J. Yuan, 2009. "A Fallacy of Division: The Failure of Market Concentration as a Measure of Competition in U.S. Banking," Working Papers 09-33, Utrecht School of Economics.
    16. Cosnita-Langlais, Andreea & Johansen, Bjørn Olav & Sørgard, Lars, 2021. "Upward pricing pressure in two-sided markets: Incorporating rebalancing effects," International Journal of Industrial Organization, Elsevier, vol. 74(C).
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    More about this item

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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