8 - Merger policy: what can we learn from experiments?
Published online by Cambridge University Press: 04 December 2009
Summary
This chapter surveys experimental literature relating to mergers. We put particular emphasis on discussing whether this literature addresses the issues that are relevant for competition policy. We also include some suggestions as to how the fit between the experiments and the requirements of competition policy research might be improved.
Introduction
So far, the explicit laboratory analysis of merger policy has been limited to very few examples, even though during the last few decades experimental economists provided many contributions directed at understanding imperfectly competitive markets. One might expect such industrial organization experiments to provide some insight into merger policy, even when they were not designed immediately for this purpose. Therefore, this survey attempts to clarify the role that experiments can play in answering the following questions:
What effects do mergers have on the profits of the inside firms, on their competitors, and on consumer welfare? On a related note, under which circumstances should a merger be allowed?
Under which circumstances are mergers likely to occur? How close is the relation between conditions that are likely to generate mergers and conditions under which mergers are desirable? In other words, under which conditions do the decisions of firms lead to the “right kind of mergers”?
When policy decisions about mergers have to be taken without precise information about whether the theoretical conditions for allowing them are fulfilled, what kind of simple proxies should be used to determine that the circumstances are right?
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- Experiments and Competition Policy , pp. 185 - 216Publisher: Cambridge University PressPrint publication year: 2009
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