Tuesday, October 6, 2009
Posted by D. Daniel Sokol
Hiroshi Ohashi (Faculty of Economics, University of Tokyo), Tsuyoshi Nakamura (Faculty of Economics, Tokyo Keizai University) and Satoshi Myojo (National Institute of Science and Technology Policy (NISTEP)) provide an Empirical Assessment of Merger and its Remedies: the Yawata-Fuji Case.
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.