• *I am grateful to the Editor and to two anonymous referees for their thorough and thoughtful reports. I am also indebted to Pierpaolo Battigalli, Duarte Brito, Luís Cabral, Eileen Fumagalli, Fabio Maccheroni, Massimo Motta, Michele Polo, Thibaud Vergé and seminar participants at Bocconi University, Erasmus University of Rotterdam, IHS (Vienna), Tilburg University, Universidade Católica Portuguesa (Porto), Università Tor Vergata (Rome), CSEF-IGIER Symposium on Economics and Institutions (Capri, July, 2005) and at the 2007 EARIE Conference (Valencia) for their valuable comments on early versions of this paper. Special thanks are due to Joe Harrington for detailed comments and several very insightful discussions that substantially improved this paper. Of course, any errors remain my own. Financial support from Fundação para a Ciência e a Tecnologia is gratefully acknowledged.


This paper studies the role of structural remedies in merger control in a Cournot setting where (endogenous) mergers are motivated by prospective efficiency gains and must be submitted to an Antitrust Authority (AA) which might require partial divestiture for approval. From a merger policy perspective, this paper's main contribution is two-fold. First, it shows that if mergers do not involve all firms in the industry, then merger remedies help the AA to increase consumer surplus only if assets are divested to competitors already in the market. Second, it presents a model which clarifies that there can only exist social costs to ‘over-fixing’ the anticompetitive effects of a merger if merger review policy treats mergers as one-time events. When a more dynamic view is taken of sequential merger review, then there can never be an ‘over-fixing’ problem. In this case, however, remedies are shown to be needed to make myopic merger review optimal.