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Economies as an Antitrust Defense Revisited: The Welfare Trade-offs and Safe Harbors

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  • Kam Hon Chu

Abstract

This paper incorporates a Cournot model of oligopoly pricing into Williamson's (1968a) model to assess the welfare effect of a merger that yields economies and market power simultaneously. The results show: (i) in most cases, economies from mergers can offset price increases due to market power such that there are positive net allocative effects, and (ii) the safe harbors in the merger guidelines may fail to screen out mergers correctly. The reliability, however, can be improved by considering cost savings and price elasticities in addition to the current use of increases in HHI and post-merger HHIs.

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  • Kam Hon Chu, 2014. "Economies as an Antitrust Defense Revisited: The Welfare Trade-offs and Safe Harbors," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 21(1), pages 99-119, February.
    • Handle: RePEc:taf:ijecbs:v:21:y:2014:i:1:p:99-119
    DOI: 10.1080/13571516.2013.864116
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    1. Lester D. Taylor & H.S. Houthakker, 2010. "Consumer Demand in the United States," Springer Books, Springer, number 978-1-4419-0510-9, January.
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