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Merger Simulation: A Simplified Approach with New Applications

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Author Info
Daniel Rubinfeld (Law and Economics, University of California, Berkeley)
Roy Epstein (LECG, Inc)

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Abstract

Merger simulation is growing in importance as a tool to evaluate the unilateral competitive effects of mergers. This paper offers a relatively non-technical description of the principles of merger simulation. In addition, it introduces PCAIDS, a new and highly flexible "calibrated-demand" merger simulation methodology that is based on a simplified version of AIDS. PCAIDS can be implemented using market shares and two price elasticities; scanner or transaction-level data are not required. The paper offers some applications of merger simulation with PCAIDS that include comparisons with other simulation models. It also shows how PCAIDS can be applied to the analysis of efficiencies, divestiture, and product repositioning/entry. Finally, the paper offers an analysis of the Merger Guidelines safeharbors. A detailed mathematical appendix is included.

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Publisher Info
Paper provided by Competition Policy Center, Institute for Business and Economic Research, UC Berkeley in its series Competition Policy Center, Working Paper Series with number CPC01-026.

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Date of creation: 01 Nov 2001
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Handle: RePEc:cdl:compol:cpc01-026

Note: oai:cdlib1:iber/cpc-1000
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Related research
Keywords: antitrust; merger simulation; unilateral effects; empirical methods; JEL: L40;

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  1. repec:bep:eaptop:v:4:y:2004:i:1:p:1223-1223 is not listed on IDEAS
  2. Daniel Rubinfeld & Roy Epstein, 2003. "Merger Simulation with Brand-Level Margin Data: Extending PCAIDS with Nests," Berkeley Olin Program in Law & Economics, Working Paper Series 1088, Berkeley Olin Program in Law & Economics. [Downloadable!]
  3. Markku Stenborg, 2004. "Are There Biases in the Market Definition Procedure?," Discussion Papers 903, The Research Institute of the Finnish Economy. [Downloadable!]
  4. Nisvan Erkal & Daniel Piccinin, 2006. "Horizontal Mergers with Free Entry in Differentiated Oligopolies," Department of Economics - Working Papers Series 976, The University of Melbourne. [Downloadable!]
  5. Slade, Margaret E., 2006. "Merger Simulations of Unilateral Effects : What Can We Learn from the UK Brewing Industry?," The Warwick Economics Research Paper Series (TWERPS) 767, University of Warwick, Department of Economics. [Downloadable!]
  6. Roy J. Epstein & Dniel L. Rubinfeld, 2004. "Merger Simulation with Brand-Level Margin: Extending PCAIDS with Nests," Industrial Organization 0401003, EconWPA. [Downloadable!]
  7. Oliver Budzinski & Isabel Ruhmer, 2009. "Merger Simulation in Competition Policy: A Survey," Working Papers 82/09, University of Southern Denmark, Department of Environmental and Business Economics. [Downloadable!]
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  8. Germán Coloma, 2004. "Econometric Estimation of PCAIDS Models," CEMA Working Papers: Serie Documentos de Trabajo. 276, Universidad del CEMA. [Downloadable!]
    Other versions:
  9. Germán Coloma, 2006. "Estimation of demand systems based on elasticities of substitution," CEMA Working Papers: Serie Documentos de Trabajo. 322, Universidad del CEMA. [Downloadable!]
  10. Damien Neven & Hans Zenger, 2008. "Ex Post Evaluation of Enforcement: A Principal-Agent Perspective," De Economist, Springer, vol. 156(4), pages 477-490, December. [Downloadable!] (restricted)
  11. Gary Gorton & Matthias Kahl & Richard Rosen, 2005. "Eat or Be Eaten: A Theory of Mergers and Merger Waves," NBER Working Papers 11364, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Goppelsroeder, M. & Schinkel, M.P. & Tuinstra, J., 2006. "Quantifying the Scope for Efficiency Defense in Merger Control: The Werden-Froeb-Index," CeNDEF Working Papers 06-09, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
  13. Richard Dagen & Daniel Richards, 2006. "Merger Theory and Evidence: The Baby-Food Case Reconsidered," Discussion Papers Series, Department of Economics, Tufts University 0602, Department of Economics, Tufts University. [Downloadable!]
  14. Oliver Budzinski, 2008. "A Note on Competing Merger Simulation Models in Antitrust Cases: Can the Best Be Identified?," MAGKS Papers on Economics 200803, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
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