Horizontal mergers and uncertainty

Nicolas Le Pape and Kai Zhao

No 2013-62, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Some path-breaking work on mergers takes efficiency gains for granted, or assumes that firms have perfect knowledge when taking merger decisions. In practice, firms and competition authorities cannot know exact future efficiency gains, prior to merger consummation. This paper analyzes horizontal mergers when the output decision-making process is sequential. A key assumption is that mergers create uncertainty on productivity and informational asymmetry between firms. The paper also studies whether the merged firm has interest to reveal the information about its own cost to competing firms. In terms of Merger Approval, the paper emphasizes the timing of regulatory intervention and distinguishes two different merger control interventions (ex ante or ex post enforcement). Since prudent competition authorities (using ex ante intervention) should take the restrictive policy, the framework illustrates why US Horizontal Merger Guidelines and EC Merger Regulation are biased in favor of the consumers' interests.

Keywords: merger; competition authorities; uncertainty; asymmetric information (search for similar items in EconPapers)
JEL-codes: D21 D80 L20 L40 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.economics-ejournal.org/economics/discussionpapers/2013-62
https://www.econstor.eu/bitstream/10419/88575/1/774678348.pdf (application/pdf)

Related works:
Working Paper: Horizontal Mergers and Uncertainty (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201362

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