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Cost and Benefits of Merger Control: An Applied Game Theoretic Perspective

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  • *  A preliminary version of this paper was presented at ECOMOD 2004, International Policy Conference on Economic Modelling, Paris. This paper does not necessarily reflect the opinion of the Dutch government. Comments by Eric van Damme, Erik Kloosterhuis, Jan Tuinstra, Maarten Pieter Schinkel, Freek Bruggert and an anonymous referee are gratefully acknowledged.

SUMMARY

This paper discusses how simulation models based on game-theoretic foundations can be used to arrive at an estimate of the net benefits of the merger control legislation. We illustrate our method using the Dutch new merger control legislation that was introduced in 1998. We analyse the effects of proposed mergers in four markets where 26 firms are operating and use a sample period of 5 years. Based on the results of these cases and using a cost benefit analysis, we estimate the net benefits of Dutch merger control at about a little more than €100 million a year during the first five years of merger control in The Netherlands.

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