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
Mark-up
Demand curve
BEFT
pmono
µmono
Perfect
A
collusion
B
B
pB
E”
E”
p” Partial
collusion
COMP
Number of firms
n=1 n” nB
Total
sales
CB

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