Assessing the Consequences of a Horizontal Merger and its Remedies in a Dynamic Environment

Posted by D. Daniel Sokol

Isao Ishida (Faculty of Economics and Graduate School of Public Policy, University of Tokyo)
      Toshiaki Watanabe (Institute of Economic Research, Hitotsubashi University) offer some thoughts on Assessing the Consequences of a Horizontal Merger and its Remedies in a Dynamic Environment.

ABSTRACT: This paper estimates a dynamic oligopoly model to assess the economic consequences of a horizontal merger that took place in 1970 to create the second largest global producer of steel. The paper solves a Markov perfect Nash equilibrium for the model and simulates the welfare effects of the horizontal merger. Estimates reveal that the merger enhanced the production efficiency of the merging party by a magnitude of 4.1 %, while the exercise of market power was restrained primarily by the presence of fringe competitors. Our simulation result also indicates that structural remedies endorsed by the competition authority failed to promote competition. model.