Mergers and Acquisitions
Lecture 8
Market Size Matters
Facts
Handout
Economic Logic Verbally
Liberalise markets → De-fragmentation →
Pro-competitive effect → Industrial restructuring →
(M&A, etc.)
Monopoly case
Handout
BE-COMP Diagram
Handout
Economic Logic
State Aid (Subsidies)
Restructuring Prevention
Handout
Restructuring Prevention: Welfare Impact
Change producer surplus = zero (profit is zero pre and post).
Change consumer surplus = a+d.
Subsidy cost = a-c.
Total impact = d+c.
EU policies on ‘State Aids’
1957 Treaty of Rome bans state aid that provides firms with an unfair advantage and thus distorts competition.
Anti-Competitive Behaviour
price
Totalsales
Demand curve
Number of firms
Mark-up
COMP
BEFT
pB
Perfectcollusion
Partialcollusion
E”
nB
µmono
B
n=1 n”
pmono
E”p”
B
CB
A
EU Competition Policy
Next Week
Inequality in the EU
Read: Michie, J., `Unemployment in Europe', in Amin and Tomaney, eds. Behind the Myth of European Union: Prospects for Cohesion, Routledge Press, 1995, pgs. 51--82. 337.14 AMI
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