Consumer surplus vs. welfare standard in a political economy model of merger control |
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Authors: | Damien J. Neven,Lars-Hendrik R ller |
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Affiliation: | aGraduate Institute of International Studies, Geneva, Switzerland;bWissenschaftszentrum Berlin and Humboldt University, Germany |
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Abstract: | This paper considers the political economy environment that an antitrust agency is operating in and asks under what circumstances a consumer surplus standard yields higher welfare than a welfare standard. In particular, we address how institutional settings—such as transparency and accountability—interact with the choice of an appropriate standard. We consider a framework in which the antitrust agency can be influenced by third parties (at a cost in terms of real resources) and in which the agency is imperfectly monitored. A welfare comparison between the two standards reveals that neither standard dominates. The consumer surplus standard is attractive relative to a welfare standard, when lobbying is efficient, when accountability is low, where mergers are large and when a marginal increase in merger size is highly profitable. |
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Keywords: | Merger control Political economy Antitrust policy Capture |
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