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Negotiating remedies: revealing the merger efficiency gains

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Abstract
This paper aims to contribute to the normative economic analysis of mergers by taking into account the possible efficiency gains for the design of structural merger remedies. We show that a larger asset transfer should be requested from a less efficient merged firm than from a more efficient one, which comforts the proportionality principle advocated by competition policy practitioners. However, since cost savings are private information of merging firms, the Competition Authority will require them to reveal their efficiency gains, so as to tailor the optimal remedy. We propose a revelation mechanism combining the use of divestitures with the regulation of asset sale prices. We discuss the opportunity of such an instrument, and argue that in practice Competition Authorities might be entiled to infer a lot from the sale price of divestitures

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  • Andrea Cosnita & Jean-Philippe Tropeano, 2005. "Negotiating remedies: revealing the merger efficiency gains," Cahiers de la Maison des Sciences Economiques v05047, Université Panthéon-Sorbonne (Paris 1), revised Apr 2006.
    • Handle: RePEc:mse:wpsorb:v05047
    DOI: 10.1016/j.ijindorg.2008.06.003
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    File URL: https://halshs.archives-ouvertes.fr/halshs-00194906
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    1. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2006. "Efficiency Gains from Mergers," Chapters, in: Fabienne IIzkovitz & Roderick Meiklejohn (ed.), European Merger Control, chapter 3, Edward Elgar Publishing.
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    6. Helder Vasconcelos, 2010. "Efficiency Gains And Structural Remedies In Merger Control," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 742-766, December.
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    Cited by:

    1. Juwon Kwak, 2013. "Merger settlement as a screening device," European Journal of Law and Economics, Springer, vol. 36(3), pages 523-540, December.
    2. Bougette, Patrice, 2010. "Preventing merger unilateral effects: A Nash-Cournot approach to asset divestitures," Research in Economics, Elsevier, vol. 64(3), pages 162-174, September.
    3. Romahn, André & Friberg, Richard, 2012. "Ex-Post Merger Review and Divestitures," IESE Research Papers D/1056, IESE Business School.
    4. Chopard, Bertrand & Cortade, Thomas & Cosnita-Langlais, Andreea, 2015. "Success and failure of bargaining in merger control: The case of asset divestitures," Economic Modelling, Elsevier, vol. 49(C), pages 254-259.
    5. Friberg, Richard & Romahn, André, 2015. "Divestiture requirements as a tool for competition policy: A case from the Swedish beer market," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 1-18.
    6. Peter Ormosi, 2010. "The determinants of merger litigation strategies: An empirical analysis of EC mergers," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2010-01, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    7. Mariana Cunha & Hélder Vasconcelos, 2018. "Sequential Mergers and Antitrust Authority’s Decisions in Stackelberg Markets," Journal of Industry, Competition and Trade, Springer, vol. 18(3), pages 373-394, September.
    8. Ormosi, Peter L., 2012. "Claim efficiencies or offer remedies? An analysis of litigation strategies in EC mergers," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 578-592.
    9. Stephen Davies & Matthew Olczak, 2010. "Assessing the Efficacy of Structural Merger Remedies: Choosing Between Theories of Harm?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(2), pages 83-99, September.
    10. Harrington, Joseph E., 2021. "There may be no pass through of a merger-related cost efficiency," Economics Letters, Elsevier, vol. 208(C).
    11. Dertwinkel-Kalt, Markus & Wey, Christian, 2016. "Structural remedies as a signaling device," Information Economics and Policy, Elsevier, vol. 35(C), pages 1-6.
    12. Patrice Bougette, 2011. "Négociation d'engagements en matière de concentrations : une perspective d'économiste," Post-Print halshs-00580669, HAL.
    13. Emilie Dargaud, 2013. "Horizontal mergers, efficiency gains and remedies," European Journal of Law and Economics, Springer, vol. 36(2), pages 349-372, October.
    14. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers 527, Universidade do Porto, Faculdade de Economia do Porto.
    15. Ormosi, Peter L., 2012. "Tactical dilatory practice in litigation: Evidence from EC merger proceedings," International Review of Law and Economics, Elsevier, vol. 32(4), pages 370-377.

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    More about this item

    Keywords

    Merger control; structural merger remedies; asymmetric information;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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