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An equilibrium analysis of efficiency gains from mergers

By  |  October 11, 2012

Posted by D. Daniel Sokol

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    Dragan Jovanovic (Dusseldorf Institute for Competition Economics) and Christian Wey (Dusseldorf Institute for Competition Economics) provide An equilibrium analysis of efficiency gains from mergers.

    ABSTRACT: We analyze the efficiency defense in merger control. First, we show that the relationship between exogenous efficiency gains and social welfare can be non-monotone. Second, we consider both endogenous mergers and endogenous efficiencies and find that merger proposals are largely aligned with a proper social welfare analysis which explicitly considers the without merger counterfactual. We demonstrate that the merger specificity requirement does not help much to select socially desirable mergers; to the contrary, it may frustrate desirable mergers inducing firms not to claim efficiencies at all.