Uncertain Efficiency Gains and Merger Policy
Mariana Cunha (),
Paula Sarmento () and
Helder Vasconcelos ()
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Paula Sarmento: FEP-UP, CEF-UP
FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto
This paper studies the role of uncertainty in merger control and in merger decisions. In a Cournot setting, we consider that mergers may give rise to uncertain endogenous efficiency gains and that every merger has to be submitted for approval to the Antitrust Authority (AA). We assume that both the AA and the firms in the industry face the same uncertainty about the future efficiency gains induced by the merger. It is shown that an increase in the degree of uncertainty benefits both insider and outsider firms but also the consumers. Further, when uncertainty is high, there is a greater likelihood that firms propose a merger to the AA and that the AA accepts it. Interestingly, however, although uncertainty enhances merger approval chances, it also decreases merger's stability, by increasing outsiders' incentives to free-ride on it.
Keywords: Efficiency gains; Merger control; Uncertainty (search for similar items in EconPapers)
JEL-codes: L13 D41 D81 (search for similar items in EconPapers)
Pages: 24 pages
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:527
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