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A Capability Approach to Merger Review

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Listed:
  • Boa, I.
  • Elliott, M.
  • Foster, D.

Abstract

Merger analysis typically focuses on possible strategic price effects in markets where there is existing competition between the merging firms. We refer to this as the product based approach. This paper proposes a complementary approach based on an assessment of the merging firms' capabilities that can provide insights on potential merger effects, including in circumstances where the product based approach offers little practical guidance to antitrust authorities. Our approach is rooted in the resource-based view of business strategy that starts from the premise that it is a firm's capabilities (sometimes called core competencies), which drive its competitive advantage across markets. We argue that mergers in which firms' capabilities are less overlapping are more pro-competitive on several dimensions: immediate competition in overlapping markets, immediate competition in other markets, long-run competition and innovation.

Suggested Citation

  • Boa, I. & Elliott, M. & Foster, D., 2023. "A Capability Approach to Merger Review," Cambridge Working Papers in Economics 2312, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2312
    Note: mle30
    as

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    References listed on IDEAS

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    3. Amir, Rabah & Erickson, Philip & Jin, Jim, 2017. "On the microeconomic foundations of linear demand for differentiated products," Journal of Economic Theory, Elsevier, vol. 169(C), pages 641-665.
    4. Atkinson, Anthony B & Stiglitz, Joseph E, 1969. "A New View of Technological Change," Economic Journal, Royal Economic Society, vol. 79(315), pages 573-578, September.
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