DP2190 | To Merge or Not To Merge: That is the Question

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In this paper we analyze the implementation of socially optimal mergers when the regulator is not informed about the parameters that determine social and private gains from potential mergers. We find that most of the standard tools in dominant strategy implementation, like the revelation principle or the Vickrey-Clarke-Groves mechanism can not be applied in our framework. We show that implementation in dominant strategies of the optimal merger policy without budget balance is possible under an additional assumption. The same assumption makes possible the implementation in Nash equilibrium of the optimal merger policy with budget balance.