Author(s)
Volker Nocke and
Michael Whinston
Source
NBER Working Paper No. 14526, December 2008
Summary
This paper looks at how competition policy affects mergers and consumers.
Policy Relevance
When firms go ahead with beneficial mergers, competition authorities can avoid harm to consumers in the long run simply by blocking any mergers that harm consumers in the short run.
Main Points
- In assessing mergers, competition policy must balance harm to competition from the merger of two competing firms against benefits to consumers from the merger, such as cost reductions that lower prices.
- When an agency applies competition policy to approve or block a merger of two competing firms, its decision is likely to affect whether and when similar firms decide to merge.
- The agency’s actions might make firms avoid a future merger that would benefit consumers.
- It seems hard for a competition agency to predict the effects its decision will have.
- In many cases, the agency can help consumers just by approving each merger only when it does not harm consumers, without trying to anticipate future mergers.
