DP4175 | Efficiency Gains and Myopic Antitrust Authority in a Dynamic Merger Game

Publication Date

23/01/2004

JEL Code(s)

Keyword(s)

Programme Area(s)

Network(s)

Abstract

This Paper models a sequential merger formation game with endogenous efficiency gains in which every merger has to be submitted for approval to the Antitrust Authority (AA). Two different types of AA are studied: first, a myopic AA, which judges a given merger without considering that subsequent mergers may occur; and, second, a forward-looking AA, which anticipates the ultimate market structure a given merger will lead to. By contrasting the decisions of these two types of AA, merger policy implications can be drawn. In particular, the efficiency offence argument does not find any justification under a forward-looking AA.