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Merger Simulation: A Simplified Approach with New Applications

Author

Listed:
  • Rubinfeld, Daniel L.
  • Epstein, Roy J.

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.

Suggested Citation

  • Rubinfeld, Daniel L. & Epstein, Roy J., 2001. "Merger Simulation: A Simplified Approach with New Applications," Competition Policy Center, Working Paper Series qt2sq9s8c8, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:compol:qt2sq9s8c8
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    More about this item

    Keywords

    antitrust; merger simulation; unilateral effects; empirical methods; JEL: L40;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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