Negotiating remedies : revealing the merger efficiency gains

This paper aims to contribute to the normative economic analysis of mergers control by taking into account the possible efficiency gains for the design of structural merger remedies. We show that a larger asset transfer should be requested from a less efficient merged firm than from a more efficient one, wich conforms with the recommendations of competition policy practitioners. However, since cost savings are private information of merging firms, the Competition Authority will require them to reveal their efficiency gains, so as to tailor the optimal remedy. We propose a revelation mechanism combining the use of divestitures with the regulation of their sale price. We discuss the opportunity of such a merger policy tool, and argue that in practice it may be used to signal the efficiency gains of notified mergers.