Early Settlements and Errors in Merger Control
ESRC Centre for Competition Policy Working Paper Series
40 Pages Posted: 11 Jul 2011
There are 2 versions of this paper
Early Settlements and Errors in Merger Control
Date Written: April 1, 2011
Abstract
We develop a model of remedy offers made to an expert agency which has powers to act before any harm is experienced and is required to decide on the basis of tangible evidence. The model provides a relationship between the factors determining the probability of delay and the type of error in early settlements (i.e. insufficient versus excessive remedy). We apply the model using data from European Commission merger settlements. Our econometric analysis confirms the importance of delay costs and the uncertainty associated with the agency’s findings. Our results are also consistent with the prediction that delay is not systematically related to the inherent competitive harm of the merger proposal. We use our results to identify specific cases of insufficient remedy in early settlements.
Keywords: delayed agreement, settlement, type 1 and type 2 errors, EC
JEL Classification: K21, L41
Suggested Citation: Suggested Citation
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