Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 686: A Consumer Surplus Defense in Merger Control

Sven-Olof Fridolfsson
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Sven-Olof Fridolfsson: Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: A government wanting to promote an efficient allocation of resources as measured by the total surplus, should strategically delegate to its competition authority a welfare standard with a bias in favour of consumers. A consumer bias means that some welfare increasing mergers will be blocked. This is optimal, if the relevant alternative to the merger is another change in market structure that will even further increase the total surplus. Furthermore, a consumer bias is shown to enhance welfare even though it blocks some welfare increasing mergers when the relevant alternative is the status quo.

Keywords: Merger Control; Competition Policy; Consumer Surplus

JEL-codes: L11; L13; L41

Language: English

25 pages, January 3, 2007

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