AN ECONOMIC JUSTIFICATION FOR A PRICE STANDARD IN MERGER POLICY: THE MERGER OF SUPERIOR PROPANE AND ICG PROPANE

Abstract

Merger review policy among countries varies according to the weight given to consumers relative to producers. When both receive their full welfare weight it is said that the efficiencies defense is fully realized. No well-developed economic rationale has been given for giving more weight to consumers. Such a rationale is given here by considering equity and efficiency both as goods for which there is a willingness to pay. The willingness to pay approach not only provides a rationale for giving consumers greater weight as with, e.g. a price standard, but also shows how in principle the weight is to be derived. The merger of Superior Propane and ICG Propane in Canada raises issues of the tradeoff of equity and efficiency. The willingness to pay approach is applied to this merger as an illustration.

Citation

Zerbe, R.O. and Knott, S. (2004), "AN ECONOMIC JUSTIFICATION FOR A PRICE STANDARD IN MERGER POLICY: THE MERGER OF SUPERIOR PROPANE AND ICG PROPANE", Kirkwood, J.B. (Ed.) Antitrust Law and Economics (Research in Law and Economics, Vol. 21), Emerald Group Publishing Limited, Leeds, pp. 409-444. https://doi.org/10.1016/S0193-5895(04)21007-7