ANTITRUST VERSUS INDUSTRIAL POLICIES, ENTRY AND WELFARE

Guy Meunier, Jean-Pierre Ponssard and Francisco Ruiz-Alizeda
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Francisco Ruiz-Alizeda: X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris

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Abstract: In industries with large sunk costs, the investment strategy of competing fi rms depends on the regulatory context. We consider ex-ante industrial policies in which the sunk cost may be either taxed or subsidized, and antitrust policies which could be either pro-competitive (leading to divestiture in case of high ex-post pro tability) or lenient (allowing mergers in case of low ex-post pro tability). Through a simple entry game we completely characterize the impact of these policies and examine their associated dynamic trade-off s between the timing of the investment, the ex-post benefi ts for the consumers, and the possible duplication of fixed costs. We find that merger policies are dominated by ex-ante industrial policies, whereas the latter are dominated by divestiture policies only under very special circumstances.

Keywords: entry; industry dynamic; antitrust policy; divestiture (search for similar items in EconPapers)
Date: 2015-02-16
New Economics Papers: this item is included in nep-com, nep-ger, nep-ind and nep-reg
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Working Paper: Antitrust versus industrial policies, entry and welfare (2015)
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