Early Settlement and Errors in Merger Control

Luke Garrod and Bruce Lyons
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Bruce Lyons: Centre for Competition Policy and School of Economics, University of East Anglia

No 2011-05, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: We develop a model of remedy offers made to an expert agency which has powers to act before any harm is experienced and is required to decide on the basis of tangible evidence. The model provides a relationship between the factors determining the probability of delay and the type of error in early settlements (i.e. insufficient versus excessive remedy). We apply the model using data from European Commission merger settlements. Our econometric analysis confirms the importance of delay costs and the uncertainty associated with the agency's findings. Our results are also consistent with the prediction that delay is not systematically related to the inherent competitive harm of the merger proposal. We use our results to identify specific cases of insufficient remedy in early settlements.

Keywords: Delayed agreement; settlement; Type 1 and Type 2 errors; EC merger control; merger remedies (search for similar items in EconPapers)
JEL-codes: K21 L41 (search for similar items in EconPapers)
Date: 2011-01-01
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2011_05

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