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MERGER REVIEWS AND POST-MERGER EVALUATION WITH DEA

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Author(s): Constantin BELU

Journal: USV Annals of Economics and Public Administration
ISSN 2285-3332

Volume: 12;
Issue: 2(16);
Start page: 227;
Date: 12;
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Keywords: merger review | DEA | competition | market-side effects

ABSTRACT
Merger reviews is a core business for competition authorities (CA). In this paper I employ linear programmingmethods to evaluate potential efficiency gains following a merger, against the background of market-side effects (e.g.price increases), which are usually relevant in a CA’s merger assessment. Furthermore, I use an additive model toshow that there are circumstances where a merger cannot induce technical efficiency gains, thus limiting the scope forpotential welfare gains. I argue that when there is no potential for technical efficiency gains, the CA should consider anoutright ban of the proposed merger, because there will be little room for positive effects on market competition andrespectively, on consumer welfare.
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