Fight Cartels or Control Mergers? On the Optimal Allocation of Enforcement Efforts within Competition Policy

This paper deals with the optimal enforcement of the competition law between the merger and anti-cartel policies. We examine the interaction of these two branches of the competition policy given the budget constraint of the competition agency and taking into account the ensuing incentives for firms’ behavior in terms of choice between cartels and mergers. We are thus able to conclude on the optimal competition policy mix. We show for instance that to the extent that a tougher anti-cartel action triggers more mergers taking place, the public agency will optimally invest only in control fighting for a tight budget, and then in both instruments as soon as the budget is no longer tight. However, if the merger’s coordinated effect is taken into account, then when resources are scarce the agency may optimally have to spend first on controlling mergers before incurring the cost of fighting cartels.competition law enforcement, antitrust, merger control, anti-cartel policy

Upward Pricing Pressure in Two-Sided Markets: Incorporating Rebalancing Effects

Under embargo until: 2022-12-07In two-sided markets it is important to consider rebalancing effects following a merger, i.e. the impact of a change in margin on one side of the market, either due to a price change or to efficiency gains, on the pricing incentives on the other side. We propose modified versions for the indices of pricing pressure (UPP and GUPPI) that take this into account. We show that in two-sided markets where the cross-group externalities are positive the upward pricing pressure will typically be overstated if the rebalancing effect is ignored. Our approach explains why competition agencies should look at both sides of the market when assessing platform mergers.acceptedVersio

Horizontal mergers on platform markets: cost savings v. cross-group network effects?

We study the impact of cost savings on the outcome of horizontal mergers between two-sided platforms. We consider four symmetrically differentiated platforms located equidistantly on the unit circle and competing in membership fees. Users on both sides single-home, and we allow for both positive and negative cross-group externalities. We find that the impact of merger cost savings on prices is generally not monotonic, and that synergies are necessary for horizontal platform mergers to be Pareto-improving. Furthermore, the merger may benefit users on one side while harming users on the opposite side, which raises some interesting questions for the enforcement of merger control on two-sided markets

Horizontal mergers on platform markets: cost savings v. cross-group network effects?

We study the impact of cost savings on the outcome of horizontal mergers between two-sided platforms. We consider four symmetrically differentiated platforms located equidistantly on the unit circle and competing in membership fees. Users on both sides single-home, and we allow for both positive and negative cross-group externalities. We find that the impact of merger cost savings on prices is generally not monotonic, and that synergies are necessary for horizontal platform mergers to be Pareto-improving. Furthermore, the merger may benefit users on one side while harming users on the opposite side, which raises some interesting questions for the enforcement of merger control on two-sided markets

Enforcement vs deterrence in merger control : can remedies lead to lower welfare?

This paper deals with the enforcement of merger policy, and aims to study how merger remedies affect the deterrence accomplished by controlling mergers. We determine the optimal frequency of investigations launched by the agency, and identify situations where the introduction of remedies can lead to a lower welfare. We nd that the potential for remedies can make it less likely that the worst mergers are deterred. Even if the worst mergers are deterred, the potential for remedies can lead to more mergers with a negative impact to be proposed, and eventually to more decision errors by the antitrust authorities

Enforcement of merger control: theoretical insights for its procedural design

Forthcomin

Enforcement vs deterrence in merger control : can remedies lead to lower welfare?

This paper deals with the enforcement of merger policy, and aims to study how merger remedies affect the deterrence accomplished by controlling mergers. We determine the optimal frequency of investigations launched by the agency, and identify situations where the introduction of remedies can lead to a lower welfare. We nd that the potential for remedies can make it less likely that the worst mergers are deterred. Even if the worst mergers are deterred, the potential for remedies can lead to more mergers with a negative impact to be proposed, and eventually to more decision errors by the antitrust authorities

Horizontal market concentration: Theoretical insights from the spatial models

This paper aims to further advance the study of horizontal mergers by critically reviewing the theory on spatial models that may be used for the analysis of horizontal market concentration. We examine the incentives conveyed by locations for undertaking merger and merger-related strategies, as well as the impact of merger on strategic location choices. Thereby this paper highlights the two-way relationship between market concentration behavior and firm location.geographic and product space, strategic location, horizontal market concentration, merger control