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Is Asset Divestiture Effective in Cournot Market ? A Perspective of Cost Asymmetry
Author(s): 
Pages: 21-51
Year: Issue:  3
Journal: Nankai Economic Studies

Keyword:  Cost AsymmetryAsset DivestituresHorizontal MergerUnilateral EffectsCoordinated EffectsConsumer Welfare Standard;
Abstract: Although asset divestiture has been widely applied in horizontal mergers as an effective remedy,it is unclear what is the necessary condition for the effectiveness of asset divestiture under cost asymmetry. In this paper,we analyze the effectiveness of asset divestiture under three type cost asymmetry,and conclude that:(1)If the technology asymmetry alone,mergering participant always have sufficient incentive to merger,while the horizontal merger will have a unilateral effect under the condition of special advanced industry technology,and the asset divestiture fail;(2)If the property symmetry alone,it is unuseful to transfer asset to competitor,and the effectiveness to divest asset to entrants depends on the type of efficiency obtained by mergered entity and the technology level of entrants;(3)In the case of the technology and assets are both asymmetric,divest assets to entrant could not eliminate the coordinated effect stemmed from horizontal merger,unless the technology level of entrant is higher than the lowest industry level. In a word,whether the asset divestiture is effective in asymmetric circumstances depends on if we can find a entrant with advanced technology,so that it has the ability and willingness to become an active competitor in relevant market. It implicates that the antitrust authorities need to be careful to use the structural remedies.
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