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Merger Simulation: A Simplified Approach with New Applications

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  • Epstein, Roy J.
  • Rubinfeld, Daniel L.
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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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    Bibliographic Info

    Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt9jt389nb.

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    Date of creation: 02 Nov 2001
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    Handle: RePEc:cdl:econwp:qt9jt389nb

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    Related research

    Keywords: antitrust; merger simulation; unilateral effects; empirical methods;

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    Cited by:
    1. Herrera Saavedra, Juan Pablo & Sánchez Navarro, Dennis, 2013. "Análisis de los efectos explotativos en integraciones empresariales a partir del modelo de Cournot: el caso de mercados con bienes homogéneos
      [Analysis of the exploitative effects of a merger bas
      ," MPRA Paper 52688, University Library of Munich, Germany.
    2. Stenborg, Markku, 2004. "Are There Biases in the Market Definition Procedure?," Discussion Papers 903, The Research Institute of the Finnish Economy.
    3. Daljord, Øystein & Sørgard, Lars, 2011. "Single-product versus uniform SSNIPs," International Review of Law and Economics, Elsevier, vol. 31(2), pages 142-146, June.
    4. Peter Davis & Pasquale Schiraldi, 2013. "The flexible coefficient multinomial logit (FC-MNL) model of demand for differentiated products," LSE Research Online Documents on Economics 54252, London School of Economics and Political Science, LSE Library.
    5. Doose, Anna Maria, 2013. "Methods for calculating cartel damages: A survey," Ilmenau Economics Discussion Papers 83, Ilmenau University of Technology, Institute of Economics.
    6. 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.
    7. 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).
    8. Louis Kaplow & Carl Shapiro, 2007. "Antitrust," NBER Working Papers 12867, National Bureau of Economic Research, Inc.
    9. Nisvan Erkal & Daniel Piccinin, 2006. "Horizontal Mergers with Free Entry in Differentiated Oligopolies," Department of Economics - Working Papers Series 976, The University of Melbourne.
    10. Jerome Foncel & Marc Ivaldi & Jrisy Motis, 2008. "An Econometric Workbench for Comparing the Substantive and Dominance Tests in Horizontal Merger Analysis," Working Papers 0833, University of Crete, Department of Economics.
    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.
    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.
    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.

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