Structural remedies as a signaling device

- We analyze the effects of remedies on merger activity.
- Merger efficiencies are unobservable ex ante.
- We investigate in how far remedies can be used as signaling devices.
- An efficient merger type is doomed to over-fix with its divestiture proposal.
- This holds in a pooling and possibly also in a separating equilibrium.

We analyze the effects of structural remedies on merger activity when the Antitrust Agency (AA) cannot observe a proposed merger's efficiency type. Provided the AA follows a consumer surplus standard, an efficient merger type is doomed to over-fix with its divestiture proposal in a pooling equilibrium, which is also possible under separation.