Publications

Standard analysis of mergers in oligopolies along the lines of the popular Farrell-Shapiro Framework (FSF) relies, regarding its policy conclusions, on the assumption that rational agents will only propose privately profitable mergers. If this assumption were held, a positive external effect of a proposed merger would represent a sufficient condition to allow the merger. However, the empirical picture on mergers and acquisitions reveals a significant share of unprofitable mergers, and economic theory, moreover, demonstrates that privately unprofitable mergers can be the result of rational action. Therefore, we drop this restrictive assumption and allow for unprofitable mergers to occur. This exerts a considerable impact on merger policy conclusions: while several insights of the original analysis are corroborated (e.g., efficiency defense), a positive external effect does not represent a sufficient condition for the allowance of a merger any longer. Applying such a rule would cause a considerable amount of false decisions.

Robinson Crusoe stories were and are extensively used in neoclassical economics. The behavior of neoclassical Robinson Crusoe, however, is at odds both with that of Defoe's hero, the original Robinson Crusoe, and that of real-world castaways. Only the early neoclassicals can be criticized for these contradictions because they intended to explain the behavior of their isolated individuals, whereas modern neoclassicals only seek to describe the decisions of Robinson Crusoe in terms of modern choice theory. This contrast mirrors the change in the way utility theory is conceived - no longer as a means to explain behavior but only as a means to describe it. It is argued that Robinson Crusoe and homo economicus are closely related and that, therefore, the Robinson Crusoe stories afford insights into the development of neoclassical economics and the problems resulting from its reliance upon the isolated-individual paradigm.