The Need to Measure the Effect of Merger Policy and How to Do It
AbstractIn 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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Bibliographic InfoPaper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 200715.
Length: 17 pages
Date of creation: Dec 2007
Date of revision:
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- Orley C. Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009.
"Generating Evidence to Guide Merger Enforcement,"
NBER Working Papers
14798, National Bureau of Economic Research, Inc.
- Shapiro, Carl & Farrell, Joseph, 2008.
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Department of Economics, Working Paper Series
qt35c5f846, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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- Farrell, Joseph & Shapiro, Carl, 2008. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," Competition Policy Center, Working Paper Series qt8z51b1q8, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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