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Using retail data for upstream merger analysis

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Author Info

  • Villas-Boas, Sofia B

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

Abstract

The typical situation faced by antitrust authorities is to analyze a proposed manufacturer merger using scanner data at retail-level. Starting with a benchmark model of manufacturers' and retailers' sequential Bertrand-Nash pricing behavior, I perform counterfactual experiments to explore the relationship between downstream retailer pricing models and the resulting estimates of upstream mergers, in the absence of wholesale prices. Looking at scanner data for the ground coffee category sold at several retail chains in Germany I find that not considering retail pricing explicitly when analyzing the potential consequences of an upstream merger, implies simulated changes in welfare that are significantly different given the underlying model of retail pricing behavior. These findings are relevant for competition policy, and authorities should consider incorporating the role of retailers in upstream merger analyzes, especially in the presence of an increasingly consolidated retail food industry.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1030.

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Length: 26 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:are:cudare:1030

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Postal: University of California, Giannini Foundation of Agricultural Economics Library, 248 Giannini Hall #3310, Berkeley CA 94720-3310
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Related research

Keywords: data analysis; economic analysis; mathematical models; mergers; oligopoly;

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References

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  1. Patrick Rey & Thibaud Verge, 2002. "Resale Price Maintenance and Horizontal Cartel," The Centre for Market and Public Organisation 02/047, Department of Economics, University of Bristol, UK.
  2. Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B., 2007. "Determinants of Margins in the Distribution Channel: An Empirical Investigation," Research Papers 1959, Stanford University, Graduate School of Business.
  3. Julie H. Mortimer, 2008. "Vertical Contracts in the Video Rental Industry -super-1," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 165-199.
  4. Volker Nocke & Lucy White, 2007. "Do Vertical Mergers Facilitate Upstream Collusion?," American Economic Review, American Economic Association, vol. 97(4), pages 1321-1339, September.
  5. Villas-Boas, Sofia & Hellerstein, Rebecca, 2006. "Identification of supply models of retailer and manufacturer oligopoly pricing," Economics Letters, Elsevier, vol. 90(1), pages 132-140, January.
  6. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  7. Marie-Laure Allain & Saïd Souam, 2000. "Horizontal Mergers and Vertical Relationships," Working Papers 2000-27, Centre de Recherche en Economie et Statistique.
  8. L Bettendorf & F Verboven, 2000. "Incomplete transmission of coffee bean prices: evidence from The Netherlands," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 27(1), pages 1-16, March.
  9. McFadden, Daniel L., 1984. "Econometric analysis of qualitative response models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 24, pages 1395-1457 Elsevier.
  10. Sofia Berto Villas-Boas, 2007. "Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 625-652.
  11. Bonnet, C. & Dubois, P. & Simioni, M., 2006. "Two-part tariffs versus linear pricing between manufacturers and retailers : empirical tests on differentiated products markets," Economics Working Paper Archive (Toulouse) 200604, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
  12. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  13. Richard J. Sexton, 2000. "Industrialization and Consolidation in the U.S. Food Sector: Implications for Competition and Welfare," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(5), pages 1087-1104.
  14. Justine S. Hastings, 2004. "Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California," American Economic Review, American Economic Association, vol. 94(1), pages 317-328, March.
  15. Berry, Steven & Pakes, Ariel, 1993. "Some Applications and Limitations of Recent Advances in Empirical Industrial Organization: Merger Analysis," American Economic Review, American Economic Association, vol. 83(2), pages 247-52, May.
  16. Ronald W. Cotterill, 2006. "Antitrust analysis of supermarkets: global concerns playing out in local markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), pages 17-32, 03.
  17. repec:bla:restud:v:75:y:2008:i:1:p:165-199 is not listed on IDEAS
  18. Draganska, Michaela & Klapper, Daniel, 2006. "Retail Environment and Manufacturer Competitive Intensity," Research Papers 1953, Stanford University, Graduate School of Business.
  19. Jean-Pierre Dubé, 2005. "Product Differentiation and Mergers in the Carbonated Soft Drink Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(4), pages 879-904, December.
  20. Cotterill, Ronald W., 2006. "Antitrust analysis of supermarkets: global concerns playing out in local markets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(1), March.
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Citations

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Cited by:
  1. Nilsen, Øivind Anti & Sørgard, Lars & Ulsaker, Simen A., 2013. "Upstream Merger in a Successive Oligopoly: Who Pays the Price?," Discussion Paper Series in Economics 17/2013, Department of Economics, Norwegian School of Economics.
  2. Rickert, Dennis & Wey, Christian & Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J., 2013. "Inter-Format Competition among Retailers - The Role of Private Label Products in Market Delineation," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79797, Verein für Socialpolitik / German Economic Association.
  3. Ailawadi, K.H. & Bradlow, E.T. & Draganska, M. & Nijs, V. & Rooderkerk, R.P. & Sudhir, K. & Wilbur, K.C. & Zhang, J., 2010. "Empirical models of manufacturer-retailer interaction: A review and agenda for future research," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4163972, Tilburg University.
  4. Pofahl, Geoffrey M. & Carlson, Jared, 2010. "Evaluating the Unilateral Price and Variety Effects of Horizontal Mergers," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 62014, Agricultural and Applied Economics Association.

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