Dynamic Merger Review

Posted by D. Daniel Sokol

In a very interesting paper  Volker Nocke (Oxford - Department of Economics)and Michael D. Whinston (Northwestern - Department of Economics) discuss Dynamic Merger Review.

ABSTRACT: We analyze the optimal dynamic policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and occur over time. Approving a currently proposed merger will affect the profitability and welfare effects of potential future mergers, the characteristics of which may not yet be known to the antitrust authority. We show that, in many cases, this apparently difficult problem has a simple resolution: an antitrust authority can maximize discounted consumer surplus by using a completely myopic merger review policy that approves a merger today if and only if it does not lower consumer surplus given the current market structure.