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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 26, No. 2, pp.239-254
ISSN: 1225-0279 (Print)
Print publication date 30 May 2013
Received 07 Nov 2012 Revised 04 Jan 2013 Accepted 05 Feb 2013

An Optimal Incentive Tax Policy on Horizontal Mergers

Sang-Ho Lee
Professor, Department of Economics, Chonnam National University, 77 Yongbong-Ro, Bukgu, Gwangju, 500-757, South Korea, Tel: +82-62-530-1553 sangho@jnu.ac.kr

JEL Classification: L41, D4, K0

Abstract

This paper analyzes an optimal antitrust policy on horizontal mergers under asymmetric information when antitrust agency cannot observe the post-merger private cost of merged firms. By using a discrete mechanism design approach with self-selection, this paper proposes an incentive compatible lump-sum tax scheme to provide an efficient decision on whether the application for merger should be accepted or rejected. Results show that the optimal size of lump-sum tax is not affected by the informational rent of private post-merger cost information of merged firms.

Keywords:

Antitrust policy, horizontal merger, Asymmetric information, Lump-sum tax, incentive compatibility, Mechanism design

Acknowledgments

This paper was presented at the joint conference of Korea Economic Associations (Seoul, Korea, 2013). I am greatly indebted to the comments and suggestions made by two anonymous referees of this journal. This study was financially supported by Chonnam National University, 2011.

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