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Fight, Fold or Settle?: Modelling the Reaction to FTC Merger Challenges

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  • Coate, Malcolm B
  • Kleit, Andrew N
  • Bustamante, Rene

Abstract

This paper models the reaction of firms to Federal Trade Commission (FTC) decisions that seek to block proposed horizontal mergers. The authors find that firms' responses to the FTC's decisions depend on a number of factors but only weakly on the structural merits of the FTC's challenge. For a large number of the FTC's merger challenges, they find that firms have strong incentives to settle with the Commission, regardless of the relevant competitive concerns. Therefore, in these matters the FTC appears to have powers more like a regulatory agency than a prosecutor. Copyright 1995 by Oxford University Press.

Suggested Citation

  • Coate, Malcolm B & Kleit, Andrew N & Bustamante, Rene, 1995. "Fight, Fold or Settle?: Modelling the Reaction to FTC Merger Challenges," Economic Inquiry, Western Economic Association International, vol. 33(4), pages 537-551, October.
    • Handle: RePEc:oup:ecinqu:v:33:y:1995:i:4:p:537-51
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    Cited by:

    1. Luke Garrod & Bruce Lyons, 2011. "Early Settlement and Errors in Merger Control," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2011-05, Centre for Competition Policy, University of East Anglia, Norwich, UK..

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