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Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?

By  |  May 7, 2014

Posted by Social Science Research Network

Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare? – Andreea Cosnita (Université Paris I Panthéon-Sorbonne – Maison des Sciences Economiques) and Lars Sorgard )Norwegian School of Economics and Business Administration (NHH) ; Norwegian School of Economics (NHH) – Department of Economics)

ABSTRACT: This paper deals with the enforcement of merger policy, and aims to study how merger remedies affect the deterrence accomplished by controlling mergers. We determine the optimal frequency of investigations launched by the agency, and identify situations where the introduction of remedies can lead to a lower welfare. We Â…find that the potential for remedies can make it less likely that the worst mergers are deterred. Even if the worst mergers are deterred, the potential for remedies can lead to more mergers with a negative impact to be proposed, and eventually to more decision errors by the antitrust authorities.