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Journal of Competition Law and Economics

Ex Post Merger Evaluations and Strategic Pre–Merger Investments

Vetenskaplig artikel på engelska
Referens
Friberg, Richard, Pehr-Johan Norbäck och Lars Persson (2012). ”Ex Post Merger Evaluations and Strategic Pre–Merger Investments”. Journal of Competition Law and Economics 8(4), 831–848. doi.org/10.1093/joclec/nhs027

Författare
Richard Friberg, Pehr-Johan Norbäck, Lars Persson

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.

Pehr-Johan Norbäck

+46 (0)8 665 4522
+46 (0)73 574 3379
pehr-johan.norback@ifn.se