Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 7/2014: Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?

Andreea Cosnita-Langlais () and Lars Sørgard ()
Additional contact information
Andreea Cosnita-Langlais: University Paris Ouest Nanterre La Défense, Postal: University Paris Ouest Nanterre La Défense, Nanterre, France
Lars Sørgard: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: This paper deals with the enforcement of merger policy, and aims to study how merger emedies 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 find 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.

Keywords: Merger control; merger remedies; enforcement; deterrence.

JEL-codes: K21; L41

26 pages, March 25, 2014

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SAM0714.pdf PDF-file 

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