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Generating Evidence to Guide Merger Enforcement

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  • Orley C. Ashenfelter
  • Daniel Hosken
  • Matthew Weinberg

Abstract

The challenge of effective merger enforcement is tremendous. U.S. antitrust agencies must, by statute, quickly forecast the competitive effects of mergers that occur in virtually every sector of the economy to determine if mergers can proceed. Surprisingly, given the complexity of the regulators task, there is remarkably little empirical evidence on the effects of mergers to guide regulators. This paper describes the necessity of retrospective analysis of past mergers in building an empirical basis for antitrust enforcement, and provides guidance on the key measurement issues researchers confront in estimating the price effects of mergers. We also describe how evidence from merger retrospectives can be used to evaluate the economic models used to predict the competitive effects of mergers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14798.

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Date of creation: Mar 2009
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Publication status: published as Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009. "Generating Evidence to Guide Merger Enforcement," CPI Journal, Competition Policy International, vol. 5.
Handle: RePEc:nbr:nberwo:14798

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  1. Orley Ashenfelter & Daniel Hosken, 2008. "The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies," NBER Working Papers 13859, National Bureau of Economic Research, Inc.
  2. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  3. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
  4. Chouinard, Hayley & Perloff, Jeffrey M., 2002. "Gasoline Price Differences: Taxes, Pollution Regulations, Mergers, Market Power, and Market Conditions," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series, Department of Agricultural & Resource Economics, UC Berkeley qt2m60j5tp, Department of Agricultural & Resource Economics, UC Berkeley.
  5. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  6. McAfee, R. Preston & Williams, Michael A., 1988. "Can event studies detect anticompetitive mergers?," Economics Letters, Elsevier, Elsevier, vol. 28(2), pages 199-203.
  7. Orley Ashenfelter & David Ashmore & Jonathan Baker & Suzanne Gleason & Daniel Hosken, 2006. "Empirical Methods in Merger Analysis: Econometric Analysis of Pricing in FTC v. Staples," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(2), pages 265-279.
  8. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 46(4), pages 433-52, December.
  9. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 549-69, June.
  10. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, Econometric Society, vol. 62(6), pages 1383-1414, November.
  11. Eckbo, B. Espen, 1983. "Horizontal mergers, collusion, and stockholder wealth," Journal of Financial Economics, Elsevier, Elsevier, vol. 11(1-4), pages 241-273, April.
  12. Stillman, Robert, 1983. "Examining antitrust policy towards horizontal mergers," Journal of Financial Economics, Elsevier, Elsevier, vol. 11(1-4), pages 225-240, April.
  13. Dennis W. Carlton, 2007. "The Need to Measure the Effect of Merger Policy and How to Do It," EAG Discussions Papers, Department of Justice, Antitrust Division 200715, Department of Justice, Antitrust Division.
  14. Justine S. Hastings & Richard J. Gilbert, 2005. "MARKET POWER, VERTICAL INTEGRATION AND THE WHOLESALE PRICE OF GASOLINE -super-* ," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 53(4), pages 469-492, December.
  15. Matthew Weinberg, 2007. "The Price Effects of Horizontal Mergers: A Survey," Working Papers, Princeton University, Department of Economics, Center for Economic Policy Studies. 62, Princeton University, Department of Economics, Center for Economic Policy Studies..
  16. John Simpson & Christopher Taylor, 2008. "Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 51(1), pages 135-152, 02.
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Citations

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Cited by:
  1. Emilie Dargaud & Carlo Reggiani, 2012. "On the Price Effects of Horizontal Mergers : A Theoretical Interpretation," Working Papers halshs-00717467, HAL.
  2. Jason Allen & Robert Clark & Jean-François Houde, 2013. "The Effect of Mergers in Search Market: Evidence from the Canadian Mortgage Industry," NBER Working Papers 19126, National Bureau of Economic Research, Inc.
  3. Davies, Stephen & Olczak, Matthew & Coles, Heather, 2011. "Tacit collusion, firm asymmetries and numbers: Evidence from EC merger cases," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 29(2), pages 221-231, March.
  4. Aviv Nevo & Michael D. Whinston, 2010. "Taking the Dogma out of Econometrics: Structural Modeling and Credible Inference," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 24(2), pages 69-82, Spring.
  5. Joseph Farrell & Paul Pautler & Michael Vita, 2009. "Economics at the FTC: Retrospective Merger Analysis with a Focus on Hospitals," Review of Industrial Organization, Springer, Springer, vol. 35(4), pages 369-385, December.
  6. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The credibility revolution in empirical economics: how better research design is taking the con out of econometrics," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 48898, London School of Economics and Political Science, LSE Library.
  7. Dan Luo, 2014. "The Price Effects of the Delta/Northwest Airline Merger," Review of Industrial Organization, Springer, Springer, vol. 44(1), pages 27-48, February.
  8. Duso, Tomaso & Argentesi, Elena & Aguzzoni, Luca & Ciari, Lorenzo & Tognoni, Massimo, 2013. "Ex-post Merger Evaluation in the UK Retail Market for Books," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80025, Verein für Socialpolitik / German Economic Association.
  9. Jason Allen & Robert Clark & Jean-François Houde, 2012. "Price Competition and Concentration in Search and Negotiation Markets: Evidence from Mortgage Lending," Working Papers, Bank of Canada 12-4, Bank of Canada.
  10. Duarte Brito & Pedro Pereira & Joaquim Ramalho, 2013. "Mergers, Coordinated Effects and Efficiency in the Portuguese Non-Life Insurance Industry," CEFAGE-UE Working Papers 2013_18, University of Evora, CEFAGE-UE (Portugal).
  11. Orley C. Ashenfelter & Daniel Hosken & Matthew C. Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," NBER Working Papers 19939, National Bureau of Economic Research, Inc.
  12. Pennerstorfer, Dieter & Weiss, Christoph, 2013. "Spatial clustering and market power: Evidence from the retail gasoline market," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 43(4), pages 661-675.
  13. Leheyda, Nina & Verboven, Frank, 2013. "Scrapping subsidies during the financial crisis: Evidence from Europe," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 13-079, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. Packalen, Mikko & Sen, Anindya, 2013. "Static and dynamic merger effects: A market share based empirical analysis," International Review of Law and Economics, Elsevier, Elsevier, vol. 36(C), pages 12-24.

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