Working Paper: NBER ID: w14526
Authors: Volker Nocke; Michael D. Whinston
Abstract: We analyze the optimal dynamic policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and occur over time. Approving a currently proposed merger will affect the profitability and welfare effects of potential future mergers, the characteristics of which may not yet be known to the antitrust authority. We show that, in many cases, this apparently difficult problem has a simple resolution: an antitrust authority can maximize discounted consumer surplus by using a completely myopic merger review policy that approves a merger today if and only if it does not lower consumer surplus given the current market structure.
Keywords: mergers; antitrust; consumer surplus; dynamic policy
JEL Codes: L0; L4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Approval of a merger (G34) | Discounted consumer surplus (D11) |
| Approval of a merger today (G34) | Profitability and welfare effects of future mergers (D69) |
| Mergers that enhance consumer surplus (D43) | Benefits of other similar mergers (G34) |
| Myopic policy (E60) | Future beneficial mergers (G34) |