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Compulsory or Voluntary Pre-merger Notification? Theory and Some Evidence


  • Chongwoo, Choe
  • Shekhar, Chander


We compare the prevailing system of compulsory pre-merger notification with the Australian system of voluntary pre-merger notification. It is shown that, for a non-trivial set of parameter values, a perfect Bayesian equilibrium exists in mixed strategies in which the regulator investigates un-notified mergers with probability less than one and the parties choose notification with probability less than one. Thanks to the signaling opportunity that arises when notification is voluntary, voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties. Some of the theoretical predictions are supported by exploratory empirical tests using merger data from Australia. Overall, our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator.

Suggested Citation

  • Chongwoo, Choe & Shekhar, Chander, 2009. "Compulsory or Voluntary Pre-merger Notification? Theory and Some Evidence," MPRA Paper 13450, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:13450

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    References listed on IDEAS

    1. Philip L. Williams & Graeme Woodbridge, 2004. "Antitrust Merger Policy: Lessons from the Australian Experience," NBER Chapters,in: Governance, Regulation, and Privatization in the Asia-Pacific Region, NBER East Asia Seminar on Economics, Volume 12, pages 35-72 National Bureau of Economic Research, Inc.
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    5. Chander Shekhar & Philip L. Williams, 2004. "Should the Pre-Notification of Mergers Be Compulsory in Australia?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(4), pages 383-390, December.
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    Cited by:

    1. Andreea Cosnita-Langlais, 2016. "Enforcement of Merger Control. Theoretical Insights for Its Procedural Design," Revue économique, Presses de Sciences-Po, vol. 67(HS1), pages 39-51.
    2. Gonzalez, Aldo & Benitez, Daniel, 2009. "Optimal pre-merger notification mechanisms - incentives and efficiency of mandatory and voluntary schemes," Policy Research Working Paper Series 4936, The World Bank.
    3. Andreea Cosnita-Langlais & Jean-Philippe Tropeano, 2013. "Ex post or ex ante? On the optimal timing of merger control," EconomiX Working Papers 2013-22, University of Paris Nanterre, EconomiX.

    More about this item


    Merger regulation; pre-merger notification; abnormal returns;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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