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Optimal Merger Remedies

Author

Listed:
  • Volker Nocke
  • Andrew Rhodes

Abstract

This paper studies optimal merger remedies when an antitrust authority has a consumer surplus standard. Remedies are modeled as asset divestitures which make the firm receiving the assets more efficient, at the expense of the merged firm. If a merger affects only a single market, asset divestitures on their own are not sufficient for the merger to be implemented--synergies are also required. As the market becomes less competitive, it is less likely that any merger is implemented; conditional on implementing one, it is more likely that divestitures are used to create a new competitor. If instead a merger affects several different markets, and the authority cares about consumer surplus aggregated over all markets, then it is optimal to divest as many assets as feasible in some markets and no assets in all remaining markets. The optimal merger proposal is more likely to entail divestitures in more competitive markets.

Suggested Citation

  • Volker Nocke & Andrew Rhodes, 2025. "Optimal Merger Remedies," CRC TR 224 Discussion Paper Series crctr224_2025_680, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_680
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp680
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    More about this item

    Keywords

    Horizontal mergers; divestitures; Cournot; merger control;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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