On the Desirability of an Efficiency Defense in Merger Control

Paul Heidhues () and Johan Lagerlof

No 3841, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a model in which two firms that have proposed to merge are privately informed about merger-specific efficiencies. This enables the firms to influence the merger control procedure by strategically revealing their information to an antitrust authority. Although the information improves upon the quality of the authority?s decision, the influence activities may be detrimental to welfare if information processing/gathering is excessively costly. Whether this is the case depends on the merger control institution and, in particular, whether it involves an efficiency defense. We derive the optimal institution and provide conditions under which an efficiency defense is desirable. We also discuss the implications for antitrust policy and outline a three-step procedure that takes the influence activities into consideration.

Keywords: Lobbying; Rent seeking; Asymmetric information; Disclosure; Efficiency gains; Antitrust (search for similar items in EconPapers)
JEL-codes: D72 D82 K21 L40 (search for similar items in EconPapers)
Date: 2003-03
New Economics Papers: this item is included in nep-law
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Related works:
Journal Article: On the desirability of an efficiency defense in merger control (2005)
Working Paper: On the Desirability of an Efficiency Defense in Merger Control (2004)
Working Paper: On the Desirability of an Efficiency Defense in Merger Control (2002)
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