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Unformatted text preview: es: an otherwise anticompetitive merger will be accepted, if the
the failing firm would be unable to meet its financial
obligations in the near future
obligations it would be not able to reorganise under „Chapter 11
of the Bankruptcy Act“
of there are no suitable alternative buyers that would
keep the failing firm‘s tangible and intangible assets in
the relevant market while having lower antithe
competitive effects than the proposed merger in absence of the merger, the failing firm‘s assets
would have exited the market
17 Efficiency Gains How
How should one treat mergers that
generate efficiency gains?
e.g. cost reductions due to economies of
Efficiency gains may offset the enhanced
market power effect.
market If efficiency gains are large enough,
merger may lead to lower prices.
18 Efficiency Gains Back
Back on Oude Markt: suppose
suppose all the Pizza Places merge and can
now buy their ingredients in larger quantities,
so that they get a price discount from the
supplier Pizza prices may fall due to cost savings Both
Both consumer surplus and total welfare
19 Sources of Efficiency Gains Economies of scale and scope lower cost due to joint production synergies in R&D rationalization of distribution and marketing
activities cost savings in administration Managerial
Managerial „discipline“: merger may
replace less able managers with better
ones (no strong empirical support for this).
20 Sources of efficiency gains Note:
Note: if efficiency gains only result from
reduction of fixed cost, it has no effect on
pricing (as firms price based on variable
May still be welfare enhancing, but only due to
higher profits of merged firms
higher Typically agencies favor improvements of
21 Asymmetric Information Competition
Competition Authority is less informed
about the consequences within the
merged firm than the firms themselves
merged If efficiency gains are crucial determinant
of authority‘s decision, merging firms have
an incentive to overstate efficiency gains
an Rivals will understate the efficiency gains Authority should rely on independent
studies on possible efficiency gains
22 Pro-collusive effects more
more favorable conditions for collusion in
industry after merger, e.g. reduced number firms in market from 3 to 2 remaining fi...
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This note was uploaded on 01/22/2014 for the course ECON D0T32A taught by Professor Czarnitzkidirk during the Spring '13 term at Katholieke Universiteit Leuven.
- Spring '13