FIGHT, FOLD OR SETTLE?: MODELLING THE REACTION TO FTC MERGER CHALLENGES

MALCOLM B. COATE; ANDREW N. KLEIT; RENE BUSTAMANTE

doi:10.1111/j.1465-7295.1995.tb01880.x

FIGHT, FOLD OR SETTLE? MODELLING THE REACTION TO FTC MERGER CHALLENGES

MALCOLM B. COATE, ANDREW N. KLEIT, RENE BUSTAMANTE

John and Willie Leone Department of Energy & Mineral Engineering (EME)

Research output: Contribution to journal › Article › peer-review

11 Scopus citations

Abstract

This paper models the reaction of firms to Federal Trade Commission (FTC) decisions which seek to block proposed horizontal mergers. We find that firms' responses to the FTC's decisions depend on a number f factors, but only weakly on the structural merits of the FTC's challenge. For a large number of the FTC's merger challenges, we find that firms have strong incentives to settle with the Commission, regardless of the relevant competitive concerns. Therefore, in these matters the FTC appears to have powers more like a regulatory agency than a prosecutor.

Original language	English (US)
Pages (from-to)	537-551
Number of pages	15
Journal	Economic Inquiry
Volume	33
Issue number	4
DOIs	https://doi.org/10.1111/j.1465-7295.1995.tb01880.x
State	Published - Oct 1995

All Science Journal Classification (ASJC) codes

General Business, Management and Accounting
Economics and Econometrics

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AB - This paper models the reaction of firms to Federal Trade Commission (FTC) decisions which seek to block proposed horizontal mergers. We find that firms' responses to the FTC's decisions depend on a number f factors, but only weakly on the structural merits of the FTC's challenge. For a large number of the FTC's merger challenges, we find that firms have strong incentives to settle with the Commission, regardless of the relevant competitive concerns. Therefore, in these matters the FTC appears to have powers more like a regulatory agency than a prosecutor.

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FIGHT, FOLD OR SETTLE? MODELLING THE REACTION TO FTC MERGER CHALLENGES

Abstract

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