Efficiency Defence, Administrative Fuzziness, and Commitment in Merger Regulation

Andrei Medvedev

No 06-8, Working Papers from Centre for Competition Policy, University of East Anglia

Abstract: This paper develops a signalling model to look at some effects of the inclusion of an efficiency defence in merger regulation. By incorporating Type I and Type II errors into the antitrust agency's pay-off function approval probabilities are endogenized. The agency can choose to use a fuzzy approval rule (mixed strategies) after observing a double signal (produced evidence and the way it has been produced) as a tool to (partially) separate different merger types by changing approval probabilities and, consequently, firms' expected payoffs from a merger. The separation leads to a lower value of the expected mistake by the agency. If the agency can commit to certain policies, then a fuzzy approval rule is preferred under a wide range of parameters.

Keywords: Merger regulation; efficiency defence; signalling; commitment (search for similar items in EconPapers)
JEL-codes: K21 L44 L51 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-05
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Working Paper: Efficiency Defence, Administrative Fuzziness, and Commitment in Merger Regulation (2006)
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