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Divestitures and the Screening of Efficiency Gains

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  • Aldo González Tissinetti

Abstract

This paper studies how the use of divestiture in merger control can affect the revelation of information about the level of efficiency gains that a proposed merger carries. We show that a decision policy that uses costly divestiture as a screening instrument presents superior results respect to a blind policy where the decision is based only on a priori beliefs about the level of efficiency gains. This new optimal policy eliminates type I error -allowing inefficient mergers- and mitigates type II error -rejecting good mergers-. If efficiency gains take place in the divested markets as well, an “informational” efficiency offense argument may arise, forcing the competition authority not to the disclose all the level of information desired if this jeopardizes the feasibility of the remedy.

Suggested Citation

  • Aldo González Tissinetti, 2008. "Divestitures and the Screening of Efficiency Gains," Working Papers wp271, University of Chile, Department of Economics.
    • Handle: RePEc:udc:wpaper:wp271
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    References listed on IDEAS

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    1. Lars-Hendrik Röller & Johan Stennek & Frank Verboven, 2006. "Efficiency Gains from Mergers," Chapters, in: Fabienne IIzkovitz & Roderick Meiklejohn (ed.), European Merger Control, chapter 3, Edward Elgar Publishing.
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    Cited by:

    1. Emilie Dargaud, 2013. "Horizontal mergers, efficiency gains and remedies," European Journal of Law and Economics, Springer, vol. 36(2), pages 349-372, October.
    2. Juwon Kwak, 2013. "Merger settlement as a screening device," European Journal of Law and Economics, Springer, vol. 36(3), pages 523-540, December.

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