Mergers with Structural Remedies in a Cournot Oligopoly ()
ABSTRACT
In a Cournot oligopolistic market, we investigate the
social welfare effects of a one-shot bilateral merger with efficiency gains and
structural remedies. The optimal merger policy trades off efficiency gains against
market power. We show that a special case of structural remedies, namely, the divestiture
of differentiated brands to an existing competitor, can be a powerful tool to lessen
the merged entity’s market power. As a consequence of the aforementioned trade-off,
mergers with remedies can increase the scope for privately and socially desirable
mergers, and lower efficiency gains from the merger require more divestitures to
the competitor.
Share and Cite:
Guo, D. (2020) Mergers with Structural Remedies in a Cournot Oligopoly.
Theoretical Economics Letters,
10, 366-383. doi:
10.4236/tel.2020.102025.
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