We study optimal merger policy in a dynamic model in which the presence of scale
economies implies that firms can reduce costs through either internal investment in build-
ing capital or through mergers. The model, which we solve computationally, allows firms
to invest or propose mergers according to the relative profitability of these strategies. An
antitrust authority is able to block mergers at some cost. We examine the optimal policy
when the antitrust authority can commit to a policy rule and when it cannot commit, and
consider both consumer value and aggregate value as possible objectives of the antitrust
authority. We find that optimal policy can differ substantially from what would be best
considering only welfare in the period the merger is proposed. We also find that the abil-
ity to commit can lead to a significant welfare improvement. In general, antitrust policy
can greatly affect firms` optimal investment behavior, and firms` investment behavior can
in turn greatly affect the antitrust authority`s optimal policy.
Dieser Eintrag ist Teil der Universitätsbibliographie.
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