Long-run Effect of a Horizontal Merger and Its Remedial Standards

Takeshi Fukasawa and Hiroshi Ohashi

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: This paper estimates a dynamic oligopoly model with firms’ continuous investment decisions to assess long-run consequences of a horizontal steel merger. It employs a novel simulation method to show that the merger improved social welfare. While the merger discouraged the merged firm from investing in capacity, it encouraged investment within non-merged firms, absent the efficiency gains of the merger. The paper also evaluates the remedial measure targeting asset divestiture that was endorsed by the competition authority. The paper finds that the effects of the merger remedy persisted for the 20 years after its implementation covered by this study, and the prescribed remedy differed considerably on the standpoint of either consumer or social welfare standards.

Pages: 47 pages
Date: 2023-01
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:23001

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