How much efficiency gains and price reductions for an efficiency defense?

Simona Fabrizi () and Steffen Lippert ()

DFAEII Working Papers from University of the Basque Country - Department of Foundations of Economic Analysis II

Abstract: Potential efficiency gains due to a merger can be used by competition authorities to judge upon proposed mergers. In a world where agents’ efforts, observable or unobservable, affect the success of a production cost reducing project that may be conducted as a stand-alone firm or in a merger, we characterize the merger decision and the type of errors a competition authority may make when it relies on an efficiency defense. In addition, we show that the occurrence of either type of errors is always smaller under the unobservable efforts assumption, than under the observable efforts one.

Keywords: Mergers; Efficiency Defense; Moral Hazard (search for similar items in EconPapers)
JEL-codes: D23 D82 L12 L23 L41 (search for similar items in EconPapers)
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Date: 2004-07-16
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Dpto. de Fundamentos del Análisis Económico II, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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