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

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

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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 languageEnglish (US)
Pages (from-to)537-551
Number of pages15
JournalEconomic Inquiry
Volume33
Issue number4
DOIs
Publication statusPublished - Oct 1995

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All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics

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