March 30, 2009
Horizontal Mergers, Involuntary Unemployment, and Welfare
Posted by D. Daniel Sokol
Oliver Budzinski, University of Southern Denmark - Department of Environmental and Business Economics Jürgen-Peter Kretschmer, Philipps University Marburg - Economics offer their thoughts on Horizontal Mergers, Involuntary Unemployment, and Welfare.
ABSTRACT: Standard welfare analysis of horizontal mergers usually refers to two effects: the anticompetitive market power effect reduces welfare by enabling firms to charge prices above marginal costs, whereas the procompetitive efficiency effect increases welfare by reducing the costs of production (synergies). However, demand-side effects of synergies are usually neglected. We introduce them into a standard oligopoly model of horizontal merger by assuming an (empirically supported) decrease in labour demand due to merger-specific synergies and derive welfare effects. We find that efficiency benefits from horizontal mergers are substantially decreased, if involuntary unemployment exists. However, in full employment economies, demand-side effects remain negligible. Eventually, policy conclusions for merger control are discussed.
March 29, 2009
Blog Symposium on Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law
Posted by D. Daniel Sokol
On March 30th and 31st, our friends at Truth on the Market will hold their first blog symposium. The topic will be Michael Carrier’s (Rutgers) forthcoming book: Innovation for the 21st Century: Harnessing the Power of Intellectual Property and Antitrust Law (from Oxford University Press). Shubha reviewed the book last week here on the Antitrust and Competition Policy blog.
TOTM has invited a number of leading scholars from the fields of antitrust and intellectual property to comment on Professor Carrier’s book. Here is a description of the book’s contents from Professor Carrier:
Innovation for the 21st Century offers ten proposals, from pharmaceuticals to peer-to-peer software, that will help foster innovation. Of the ten proposals, three target antitrust topics that may be of interest to your readers: (1) settlement agreements between brand and generic firms in the pharmaceutical industry, (2) an innovation-markets framework to be applied to pharmaceutical mergers in which the “products” are in preclinical or clinical trials, and (3) standard-setting. The book also offers a primer on patent, copyright, and antitrust law, as well as the IP-antitrust intersection.
On Monday, March 30th, TOTM will focus primarily on the antitrust aspects of Carrier’s proposals. The four discussants will be: Dan Crane (University of Chicago/ Cardozo), Geoff Manne (TOTM/LECG), Phil Weiser (Colorado), and yours truly.
On Tuesday, March 31st, TOTM will focus primarily on the intellectual property aspects of Carrier’s work. The three discussants will be: Dennis Crouch (Patently-O/Missouri), Brett Frischmann (Cornell/ Loyola), and F. Scott Kieff (Wash U./ Hoover/ and on his way to GW).
On Tuesday afternoon or Wednesday morning (depending on the length of the posts), Carrier will post a response.