Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, October 13, 2016

Ex Post Merger Evaluation: How Does it Help Ex Ante?

Daniel Hosken, FTC Nathan Miller, Georgetown and Matthew Weinberg, Drexel ask Ex Post Merger Evaluation: How Does it Help Ex Ante?

ABSTRACT: Economists have long understood that mergers can diminish competition. Mergers in concentrated markets can facilitate either tacit or explicit collusion by removing a competitor. The merger of competing firms selling differentiated products also can create a unilateral incentive to increase price. This happens when some of the sales that would have been lost as the result of a price increase by the acquiring firm pre-merger are now recaptured by the acquired firm post-merger. While these possibilities provide an economic rationale for merger enforcement, mergers may occur for many other reasons that could improve how markets function—they may reduce firms’ costs or improve corporate governance by disciplining bad management.

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