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A Note on Competing Merger Simulation Models in Antitrust Cases: Can the Best Be Identified?

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  • Oliver Budzinski

    ()
    (Philipps-University Marburg)

Abstract

Advanced economic instruments like simulation models are enjoying an increased popularity in practical antitrust. There is hope that they – being quantitative predictive economic evidence – can substitute for qualitative structural analysis and lead to unambiguous results. This paper demonstrates that it can be theoretically impossible to identify the most appropriate simulation model for any given merger proposal. Due to the inevitable necessity to reduce real-world complexity and multi-parameter character of merger cases, the comparative fit of proposed merger simulation models with mutually incompatible predictions can be the same. This is valid even if an ideal antitrust procedure is assumed. This insight is important regarding two aspects. First, the scope for partisan economic evidence cannot be completely eroded in merger control. Second, simulation cannot eliminate or substitute for qualitative reasoning and economically informed common sense.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/03-2008_budzinski.pdf
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Bibliographic Info

Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200803.

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Length: 13 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:mar:magkse:200803

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Keywords: merger simulation; merger control; antitrust; economic evidence;

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References

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  1. David S. Evans & Albert L. Nichols & Richard Schmalensee, 2005. "U.S. v. Microsoft: Did Consumers Win?," NBER Working Papers 11727, National Bureau of Economic Research, Inc.
  2. Oliver Budzinski, 2008. "Monoculture versus diversity in competition economics," Cambridge Journal of Economics, Oxford University Press, vol. 32(2), pages 295-324, March.
  3. Richard A. Posner, 1999. "The Law and Economics of the Economic Expert Witness," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 91-99, Spring.
  4. 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.
  5. C. Mantzavinos, 2006. "The institutional-evolutionary antitrust model," European Journal of Law and Economics, Springer, vol. 22(3), pages 273-291, November.
  6. Budzinski, Oliver & Christiansen, Arndt, 2007. "The Oracle/PeopleSoft case: unilateral effects, simulation models and econometrics in contemporary merger control," IBES Diskussionsbeiträge 157, University of Duisburg-Essen, Faculty for Economics and Business Administration.
  7. Barry Nalebuff, 2002. "Bundling and the GE-Honeywell Merger," Yale School of Management Working Papers ysm303, Yale School of Management.
  8. Gregory Werden, 2000. "Expert Report in United States v. Interstate Bakeries Corp. and Continental Baking Co," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 139-148.
  9. Gilbert, Richard J & Katz, Michael, 2001. "An Economist's Guide to U.S. v. Microsoft," Department of Economics, Working Paper Series qt56f8p06q, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  11. Epstein, Roy J. & Rubinfeld, Daniel, 2001. "Merger Simulation: A Simplified Approach with New Applications," Department of Economics, Working Paper Series qt1c65s24r, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  12. Epstein, Roy J. & Rubinfeld, Daniel L., 2001. "Merger Simulation: A Simplified Approach with New Applications," Department of Economics, Working Paper Series qt9jt389nb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  13. Gregory Werden, 2001. "Microsoft's Pricing of Windows and the Economics of Derived Demand Monopoly," Review of Industrial Organization, Springer, vol. 18(3), pages 257-262, May.
  14. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer, vol. 15(3), pages 205-217, November.
  15. Michael J. Mandel, 1999. "Going for the Gold: Economists as Expert Witnesses," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 113-120, Spring.
  16. Damien J. Neven, 2006. "Competition economics and antitrust in Europe," Economic Policy, CEPR & CES & MSH, vol. 21(48), pages 741-791, October.
  17. Epstein, Roy J. & Rubinfeld, Daniel, 2012. "Merger Simulation: A Simplified Approach with New Applications," Department of Economics, Working Paper Series qt2k9116ph, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  18. Ivaldi, Marc & Verboven, Frank, 2001. "Quantifying the Effects from Horizontal Mergers in European Competition Policy," CEPR Discussion Papers 2697, C.E.P.R. Discussion Papers.
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  20. Baker, Jonathan B & Rubinfeld, Daniel L, 1999. "Empirical Methods in Antitrust Litigation: Review and Critique," American Law and Economics Review, Oxford University Press, vol. 1(1-2), pages 386-435, Fall.
  21. Lars-Hendrik Roeller & Oliver Stehmann, 2006. "The Year 2005 at DG Competition: The Trend towards a More Effects-Based Approach," Review of Industrial Organization, Springer, vol. 29(4), pages 281-304, December.
  22. Roy J. Epstein & Daniel L. Rubinfeld, 2002. "Merger Simulation: A Simplified Approach with New Applications," Industrial Organization 0201002, EconWPA.
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Cited by:
  1. Harbord, David & Hoernig, Steffen, 2010. "Welfare Analysis of Regulating Mobile Termination Rates in the UK (with an Application to the Orange/T-Mobile Merger)," MPRA Paper 21515, University Library of Munich, Germany.
  2. Oliver Budzinski, 2009. "Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits," Working Papers 93/09, University of Southern Denmark, Department of Environmental and Business Economics.

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