Horizontal mergers in the circular city: a note

Two-firm horizontal Cournot mergers give rise to multi-plant firms in spatial markets. We study location equilibria on the circle for competition between a two-store merged entity and one then two single-store competitors. Several results turn up. First of all, we get equilibrium location patterns that could not have been obtained on the segment. Secondly, we investigate the profitability of such mergers and find that they turn out to be unprofitable much earlier.circular city

Cournot competition in spatial markets : some complementary results on complementarity

We study in this paper location equilibria for a symmetrical two-store duopoly selling complementary varieties, both on the linear and the circular markets. In contrast to the existing literature, besides assuming that each affiliate produces a different complementary variety, we equally consider in turns complementarity among all varieties on the market and substitutability between rival varieties. On the segment market, the intuition of a single-plant entity behaviour is enough to obtain and justify the result of central agglomeration. On the circle, instead, we are able to check the multiple equilibria property, to the extent that besides the intuitiive spatial pattern, we identified each time a second one, involving diametrical dispersion, viable though only for low degrees of complementarity.Complementary products, multi-store competition, spatial Cournot model.

Merger, spin-off and divestiture: insights from a spatial model

Mergers and spin-offs are typically opposite strategies for firms, and are not simultaneously profitable in a standard linear Cournot model. We propose a simple spatial Cournot framework, where merger is profitable but subsequent divisionalization is even more. However, this is true only for partial spin-off, not for total divisionalization, due to the opportunity for specific efficiency gains in a spatial setting. Finally, the resulting market structure is analyzed in terms of a post-merger divestiture required by the merger control authority. We show here the divestiture can be profitable for firms even if the merger was not, while still fulfilling its corrective role.divestiture

Negotiating remedies : revealing the merger efficiency gains

This paper contributes to the economic analysis of merger control by taking into account the efficiency gains for the design of structural merger remedies when the competition authorities do not observe the magnitude of efficiency gains. We show that whenever divestitures are necessary, the Competition Authority will need to extract from the merging partners their private information on the merger’s efficiency gains. For this we propose a revelation mechanism combining divestitures with two additional tools, the regulation of the divestitures sale price and a merger fee. We show that an optimal combination of both instruments is effective: the most efficient merged firms are claimed to pay a merger fee while the less efficient divest asets at an upwards distorted sale price.MERGER CONTROL;STRUCTURAL MERGER;REMEDIES;ASYMETRIC INFORMATION

Cournot competition in spatial markets: some complementary results on complementarity

URL des Cahiers : https://halshs.archives-ouvertes.fr/CAHIERS-MSECahiers de la Maison des Sciences Economiques 2005.61 - ISSN : 1624-0340We study in this paper location equilibria for a symmetrical two-store duopoly selling complementary varieties, both on the linear and the circular markets. In contrast to the existing literature, besides assuming that each affiliate produces a different complementary variety, we equally consider in turns complementarity among all varieties on the market and substitutability between rival varieties. On the segment market, the intuition of a single-plant entity behaviour is enough to obtain and justify the result of central agglomeration. On the circle, instead, we are able to check the multiple equilibria property, to the extent that besides the intuitiive spatial pattern, we identified each time a second one, involving diametrical dispersion, viable though only for low degrees of complementarity.Cet article étudie le choix de localisation dans un modèle d'oligopole de Cournot où les firmes produisent des biens complémentaires. Pour la première fois dans la littérature, on fait l'hypothèse que chaque filiale produit des variétés distinctes. On analyse les implications spatiale d'un tel cadre (correspondant par exemple à des firmes produisant des biens-système) en considérant les cas de la complémentarité entre variétés rivales et puis de la substituabilité. L'agglomération totale est toujours un équilibre pour la ville linéaire, ce qui est bien intuitive suivant notre hypothèse de complémentarité intra-firme. Néanmoins, pour la ville circulaire, en plus de l'équilibre intuitif impliquant l'agglomération des propres filiales, on démontre à chaque fois l'existence d'un deuxième équilibre qui exige la dispersion diamétrale des firmes. Ceci montre la robustesse de la multiplicité d'équilibres de localisation dans le cadre circulaire

On the Effective Design of the Efficiency Defence

The efficiency defence was long delayed in the European merger control due to costly implementation issues. In this paper we argue that the upstream consequences of the efficiency defence should equally be considered, namely the improvement of the distribution of notified mergers through the incentives it provides towards more efficient mergers. First of all, we show that even if the Competition Authority may not tell apart the mergers that rightfully invoke the efficiency defence from those that do not, allowing such a procedure can lead to a lower post-merger price. Secondly, we study the impact of merger remedies on the incentives conveyed by the efficiency defence, and conclude on the optimal design of the efficiency defence procedure.Merger control, efficiency defence, merger remedies.

Negotiating remedies : revealing the merger efficiency gains

This paper aims to contribute to the normative economic analysis of mergers control by taking into account the possible efficiency gains for the design of structural merger remedies. We show that a larger asset transfer should be requested from a less efficient merged firm than from a more efficient one, wich conforms with the recommendations of competition policy practitioners. However, since cost savings are private information of merging firms, the Competition Authority will require them to reveal their efficiency gains, so as to tailor the optimal remedy. We propose a revelation mechanism combining the use of divestitures with the regulation of their sale price. We discuss the opportunity of such a merger policy tool, and argue that in practice it may be used to signal the efficiency gains of notified mergers.Merger control, structural merger remedies, asymmetric information.

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