Douglas D. Davis () (Department of Economics, Virginia Commonwealth University, Richmond, VA 23284-4000, USA) Bart J. Wilson () (Economic Science Laboratory, University of Arizona, McClelland Hall Room 116,P.O. Box 210108, Tucson, AZ 85721-0108, USA)
Additional information is available for the following
registered author(s):
We report a policy experiment that illustrates a potential problem of using historical pass-through rates as a means of predicting the competitive consequences of projected firm-specific cost savings in antitrust contexts, particularly in merger analysis. The effects of cost savings on welfare can vary vastly, depending on how the savings affect the industry supply schedule. In a capacity-constrained price-setting oligopoly, we observe that cost savings can overwhelm behaviorally salient market power incentives when the savings affect marginal (high cost) units. However, cost savings of the same magnitude on an infra-marginal unit leave market power unchanged.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by Springer in its journal Economic Theory.
Volume (Year): 16 (2000) Issue (Month): 3 () Pages: 545-565 Download reference. The following formats are available: HTML,
plain text,
BibTeX,
RIS (EndNote),
ReDIF