Ex Post Merger Evaluations and Strategic Pre-Merger Investments

Reprint No. 2012:50

Author(s): Richard Friberg, Pehr-Johan Norbäck and Lars PerssonYear: 2012 Title: Journal of Competition Law and Economics Volume (No.): 8 (4) Pages: 831–848
Online article (restrictions may apply)
Preliminary version

We present a model that warns against a mechanical comparison of pre- and postmerger prices. The starting point of the article is that both the seller and the buyer take into account how the acquisition price is affected by pre-merger investments. We derive conditions under which the selling of a firm triggers overinvestment by both the acquirer and the target. Under Cournot competition, linear demand, and quadratic investment costs, we show that these incentives to overinvest can lead to a lower price in a post-acquisition duopoly than in an ongoing triopoly. This finding suggests a backward-looking efficiency defense in the merger control.

Friberg, Richard, Pehr-Johan Norbäck and Lars Persson (2012), "Ex Post Merger Evaluations and Strategic Pre-Merger Investments". Journal of Competition Law and Economics 8(4), 831–848.

Pehr-Johan Norbäck


Ph: +46 8 665 4522
Mob: +46 73 574 3379

Lars Persson


Ph: +46 8 665 4504

Elgar Companion to

Social Capital and Health

Martin Ljunge okt 2018.jpg

Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

About the book


Seminars organized by IFN


To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se