Friday, November 8, 2013
Marta Troya-Martinez, University of Oxford - Department of Economics explores Information-Sharing Between Competition Authorities.
ABSTRACT: The increasing number of antitrust cases that affect more than one country calls for more active cooperation between competition authorities. I analyse the impact of exchange of confidential information between two authorities deciding on a multinational merger. The authorities want to clear the merger if the information sent by the firm suggests that the expected welfare in their country will be enhanced and the firm can secretly manipulate the precision with which it transmits this information. The authorities differ in their leniency towards the merger and we focus on the cases where the authorities disagree about the decision. Under no information-sharing, the firm chooses an extreme level of precision: very high (low) for the most (least) lenient authority. Under information-sharing, the firm is restricted to choose the same precision for both authorities. The firm's choice depends on the level of cooperation in the decision-making between the countries. If the authorities exert their veto power, the firm always uses the lowest level of precision. If the authorities also cooperate in the decision-making, the firm's choice of precision may be non-monotonic in the average welfare implications and intermediate levels of precision are chosen. Other situations where the model can be applied abound in industrial organisation and political economy.