Merger policy with merger choice

We analyze the optimal policy of an antitrust authority towards horizontal mergers when merger proposals are endogenous and firms choose which of several mutually exclusive mergers to propose. The optimal policy of an antitrust authority that seeks to maximize expected consumer surplus involves discriminating between mergers based on a naive computation of the post-merger Herfindahl index (over and above the apparent effect of the proposed merger on consumer surplus). We show that the antitrust authority optimally imposes a tougher standard on those mergers that raise the index by more.