How much efficiency gains and price reductions for an efficiency defense? 'Quanto Basta'
Potential efficiency gains due to a merger can be used by competition authorities to judge upon proposed mergers. In a world where agentsâ€™ efforts, observable or unobservable, affect the success of a production cost reducing project that may be conducted as a stand-alone firm or in a merger, we characterize the merger decision and the type of errors a competition authority may make when it relies on an efficiency defense. In addition, we show that the occurrence of either type of errors is always smaller under the unobservable efforts assumption, than under the observable efforts one.
|Date of creation:||2004|
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