Sequential decision making in merger control

Damien Neven, Vilen Lipatov and Gregor Langus ()

No 14-2014, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: We model merger control procedures as a process of sequential acquisition of information and compare US and EU procedures. In the US, the authorities do not have to justify their decision to require further information (issue a second request), whereas in the EU, the authorities face a di_erent (enforceable) standard of proof in phase I relative to phase II. We _nd that in the absence of remedies, the US procedure is always superior in terms of expected consumer welfare. When we allow for remedies, we _nd that, compared to the US, merging parties in the EU have more scope to propose remedies in phase I that will preempt the authorities from uncovering unfavorable information in phase II, and this might reduce expected consumer welfare. However, the higher standard of proof in phase I can also in some circumstances act as a commitment not to accept remedies below some threshold and yield a higher expected consumer welfare in the EU. Our model also shows that for global mergers that have the same effect in the two jurisdictions, a decision to trigger a Phase II in the EU yields the same expected consumer welfare as a clearance in Phase I with remedies in the US. However, the converse is not true.

Keywords: merger procedure; competition policy (search for similar items in EconPapers)
JEL-codes: K21 K40 L40 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2014-11
New Economics Papers: this item is included in nep-cdm, nep-com and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heiwp14-2014

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