Friday, February 18, 2011
Posted by D. Daniel Sokol
Thibaud Verg - Autorité de la Concurrence and CREST-LEI discusses Horizontal Mergers, Structural Remedies, and Consumer Welfare in a Cournot Oligopoly with Assets.
ABSTRACT: Competition authorities sometimes require that firms divest some of their assets to rivals in order to allow a merger to take place. This paper extends the results of Farrell and Shapiro [1990a] and shows that, in the absence of technological synergies, a merger is highly unlikely to benefit consumers, even if it is subjected to appropriate structural remedies. For instance, a merger may ultimately lead to a lower price only if at least two different firms acquire the divested assets, and if the merging parties had relatively important pre-merger market shares.