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American Economic Review: Vol. 103 No. 2 (April 2013)

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Merger Policy with Merger Choice

Article Citation

Nocke, Volker, and Michael D. Whinston. 2013. "Merger Policy with Merger Choice." American Economic Review, 103(2): 1006-33.

DOI: 10.1257/aer.103.2.1006

Abstract

We analyze the optimal policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and firms choose among alternative mergers. In our model, the optimal policy of an antitrust authority that seeks to maximize expected consumer surplus imposes a tougher standard on "larger" mergers, i.e., those involving firms with a larger pre-merger market share. The optimal policy is a response to a bias in firms' proposal incentives: firms always propose a larger merger when it is better for consumers than a smaller one, but sometimes will propose the larger one even when it is worse for consumers.

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Authors

Nocke, Volker (U Mannheim)
Whinston, Michael D. (Northwestern U)

JEL Classifications

D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
G34: Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
G38: Corporate Finance and Governance: Government Policy and Regulation
K21: Antitrust Law
L13: Oligopoly and Other Imperfect Markets
L41: Monopolization; Horizontal Anticompetitive Practices


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