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Internal versus External Growth in Industries with Scale Economies: A Computational Model of Optimal Merger Policy
Name
704069.pdf
Description
Published version
Size
2.66 MB
Format
Adobe PDF
Checksum (MD5)
9ce81ef9615fde5a8c89d7267118e05a
Author(s)
Mermelstein, Ben
Nocke, Volker
Satterthwaite, Mark A
Whinston, Michael D
Date Issued
2020
Journal
The Journal of Political Economy
Publisher
University of Chicago Press
Version
Final published version
Abstract
© 2019 by The University of Chicago. We study merger policy in a dynamic computational model in which firms can reduce costs through investment or through mergers. Firms invest or propose mergers according to the profitability of these strategies. An antitrust authority can block mergers at some cost. We examine the optimal policy for an antitrust authority that cannot commit to its future policy and approves mergers as they are proposed. We find that the optimal policy can differ substantially from a policy based on static welfare. In general, antitrust policy can greatly affect firms’ investment behavior, and firms’ investment behavior can greatly affect the optimal antitrust policy.
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
10.1086/704069
