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The Need to Measure the Effect of Merger Policy and How to Do It

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  • Dennis W. Carlton

    (Economic Analysis Group, Antitrust Division, Department of Justice)

Abstract

In this article, I explain the inadequacy of our current state of knowledge regarding the effectiveness of antitrust policy towards mergers. I then discuss the types of data that one must collect in order to be able to perform an analysis of the effectiveness of antitrust policy. There are two types of data one requires in order to perform such an analysis. One is data on the relevant market pre and post merger. The second is data on the specific predictions of the government agencies about the market post-merger. A key point of this article is to stress how weak an analysis of only the first type of data is. The frequent call for retrospective studies typically envisions relying on just this type of data, but the limitations on the analysis are not well understood. As I explain below, retrospective studies that ask whether prices went up post merger are surprisingly poor guides for analyzing merger policy. It is only when the second type of data is combined with the first type that a reliable analysis of antitrust policy can be carried out. There is a need both to collect the necessary data and to analyze it correctly.

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File URL: http://www.justice.gov/atr/public/eag/228687.pdf
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Bibliographic Info

Paper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 200715.

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Length: 17 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:doj:eagpap:200715

Contact details of provider:
Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530
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Web page: http://www.justice.gov/atr/
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Cited by:
  1. Orley C. Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009. "Generating Evidence to Guide Merger Enforcement," Working Papers 1137, Princeton University, Department of Economics, Center for Economic Policy Studies..
  2. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 10(1), pages 1-41, March.

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