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Negotiating remedies: revealing the merger efficiency gains

Author

Listed:
  • Andrea Cosnita

    (EUREQua)

  • Jean-Philippe Tropeano

    (EUREQua)

Abstract

This paper aims to contribute to the normative economic analysis of mergers by taking into account the possible efficiency gains for the design of structural merger remedies. We show that a larger asset transfer should be requested from a less efficient merged firm than from a more efficient one, which comforts the proportionality principle advocated by competition policy practitioners. However, since cost savings are private information of merging firms, the Competition Authority will require them to reveal their efficiency gains, so as to tailor the optimal remedy. We propose a revelation mechanism combining the use of divestitures with the regulation of asset sale prices. We discuss the opportunity of such an instrument, and argue that in practice Competition Authorities might be entiled to infer a lot from the sale price of divestitures

Suggested Citation

  • Andrea Cosnita & Jean-Philippe Tropeano, 2005. "Negotiating remedies: revealing the merger efficiency gains," Cahiers de la Maison des Sciences Economiques v05047, Université Panthéon-Sorbonne (Paris 1), revised Apr 2006.
    • Handle: RePEc:mse:wpsorb:v05047
    DOI: 10.1016/j.ijindorg.2008.06.003
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    Cited by:

    1. Juwon Kwak, 2013. "Merger settlement as a screening device," European Journal of Law and Economics, Springer, vol. 36(3), pages 523-540, December.
    2. Friberg, Richard & Romahn, André, 2015. "Divestiture requirements as a tool for competition policy: A case from the Swedish beer market," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 1-18.
    3. Harrington, Joseph E., 2021. "There may be no pass through of a merger-related cost efficiency," Economics Letters, Elsevier, vol. 208(C).
    4. Dertwinkel-Kalt, Markus & Wey, Christian, 2016. "Structural remedies as a signaling device," Information Economics and Policy, Elsevier, vol. 35(C), pages 1-6.
    5. Peter Ormosi, 2010. "The determinants of merger litigation strategies: An empirical analysis of EC mergers," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2010-01, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    6. Mariana Cunha & Hélder Vasconcelos, 2018. "Sequential Mergers and Antitrust Authority’s Decisions in Stackelberg Markets," Journal of Industry, Competition and Trade, Springer, vol. 18(3), pages 373-394, September.
    7. Patrice Bougette, 2011. "Négociation d'engagements en matière de concentrations : une perspective d'économiste," Post-Print halshs-00580669, HAL.
    8. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers 527, Universidade do Porto, Faculdade de Economia do Porto.
    9. Ormosi, Peter L., 2012. "Tactical dilatory practice in litigation: Evidence from EC merger proceedings," International Review of Law and Economics, Elsevier, vol. 32(4), pages 370-377.
    10. Ormosi, Peter L., 2012. "Claim efficiencies or offer remedies? An analysis of litigation strategies in EC mergers," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 578-592.
    11. Stephen Davies & Matthew Olczak, 2010. "Assessing the Efficacy of Structural Merger Remedies: Choosing Between Theories of Harm?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(2), pages 83-99, September.
    12. Emilie Dargaud, 2013. "Horizontal mergers, efficiency gains and remedies," European Journal of Law and Economics, Springer, vol. 36(2), pages 349-372, October.
    13. Bougette, Patrice, 2010. "Preventing merger unilateral effects: A Nash-Cournot approach to asset divestitures," Research in Economics, Elsevier, vol. 64(3), pages 162-174, September.
    14. Romahn, André & Friberg, Richard, 2012. "Ex-Post Merger Review and Divestitures," IESE Research Papers D/1056, IESE Business School.
    15. 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.

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    Keywords

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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