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The effects of remedies on merger activity in oligopoly

  • Dertwinkel-Kalt, Markus
  • Wey, Christian

We analyze the effects of structural remedies on merger activity in a Cournot oligopoly when the antitrust agency applies a consumer surplus standard. Remedies increase the scope for pro table and acceptable mergers, while divestitures to an entrant rm are most effective in this regard. Remedial divestitures are most attractive from a social welfare point of view, when the merging parties can extract the entire gains associated with the asset sale. We also show that the merging parties have strong incentives to search for the most efficient buyer. Finally, we identify instances so that a remedy rule induces strictly price-decreasing mergers.

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Paper provided by Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf in its series DICE Discussion Papers with number 81.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:81
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  1. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2006. "How Effective is European Merger Control?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 153, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Thibaud VERGE, 2009. "Horizontal Mergers, Structural Remedies and Consumer Welfare in a Cournot Oligopoly with Assets," Working Papers 2009-10, Centre de Recherche en Economie et Statistique.
  3. Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
  4. Vasconcelos, Helder, 2007. "Efficiency Gains and Structural Remedies in Merger Control," CEPR Discussion Papers 6093, C.E.P.R. Discussion Papers.
  5. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  6. Nocke, Volker & Whinston, Michael, 2008. "Dynamic Merger Review," CEPR Discussion Papers 7077, C.E.P.R. Discussion Papers.
  7. Joseph A. Clougherty & Jo Seldeslachts, 2013. "The Deterrence Effects of US Merger Policy Instruments," Journal of Law, Economics and Organization, Oxford University Press, vol. 29(5), pages 1114-1144, October.
  8. Spector, David, 2002. "Horizontal mergers, entry, and efficiency defences," CEPREMAP Working Papers (Couverture Orange) 0206, CEPREMAP.
  9. Cabral, Luis M. B., 2003. "Horizontal mergers with free-entry: why cost efficiencies may be a weak defense and asset sales a poor remedy," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 607-623, May.
  10. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-87, June.
  11. Joseph Farrell & Carl Shapiro, 1990. "Asset Ownership and Market Structure in Oligopoly," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 275-292, Summer.
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