Assessing Horizontal Mergers under Uncertain Efficiency Gains

Philippe Choné and Laurent Linnemer

No 2006-06, Working Papers from Center for Research in Economics and Statistics

Abstract: The analysis of horizontal mergers hinges on a tradeoff between unilateral effectsand efficiency gains. The article examines the role of uncertainty (on theefficiency gains) in this tradeoff. Common wisdom is that the antitrust authoritiesshould be very cautious about random gains. Our results show thatdismissing efficiency gains on the sole ground that they are uncertain would notbe theoretically founded. Indeed, the attitude towards uncertainty depends onthe curvature of the social objective function. We exhibit a number of situationswhere the objective is convex in the efficiency gains, implying that competitionauthorities should welcome the risk for a given expectation of efficiency gains.Implications for empirical merger analysis are exposed.

Pages: 33
Date: 2006
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Assessing horizontal mergers under uncertain efficiency gains (2008)
Working Paper: Assessing horizontal mergers under uncertain efficiency gains (2008)
Working Paper: Assessing Horizontal Mergers under Uncertain Efficiency Gains (2006)
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