Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index

Marie Goppelsroeder (), M.P. Schinkel () and Jan Tuinstra
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M.P. Schinkel: Universiteit van Amsterdam

No 06-09, CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance

Abstract: In both US and EU merger control, merger-specific efficiencies are recognized as a possible defense for horizontal mergers that raise competition concerns. We introduce the Werden-Froeb-index (WFI) to assist in evaluating these efficiencies. The index measures the average reduction in marginal costs required to restore pre-merger equilibrium prices and quantities after the merger is consummated. It has low information requirements and can deal with any number of firms in price- or quantity-competition merging fully or partially, and a large class of demand and cost functions. We show how the WFI complements Phase I merger inquiries as a screening mechanism.

Date: 2006
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Related works:
Journal Article: QUANTIFYING THE SCOPE FOR EFFICIENCY DEFENSE IN MERGER CONTROL: THE WERDEN‐FROEB‐INDEX* (2008)
Working Paper: Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index (2006)
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