IDEAS home Printed from https://ideas.repec.org/p/urv/wpaper/2072-321560.html
   My bibliography  Save this paper

Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI

Author

Listed:
  • Brito, Duarte
  • Osório, António (António Miguel)
  • Ribeiro, Ricardo
  • Vasconcelos, Helder,

Abstract

Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization of the two most traditional indicators used to screen unilateral anti-competitive effects - the Herfindahl-Hirschman Index and the Gross Upward Price Pressure Index - to partial horizontal acquisition settings. The proposed generalized indicators are endogenously derived under a probabilistic voting model in which the manager of each firm is elected in a shareholder assembly between two potential candidates who seek to obtain utility from an exogenous rent associated with corporate office. The model (i) can cope with settings involving all types of owners and rights: owners that can be internal to the industry (rival firms) and external to the industry; and rights that can capture financial and corporate control interests, can be direct and indirect, can be partial or full, (ii ) yields an endogenous measure of the owners ultimate corporate control rights, and (iii ) can also be used - in case the potential acquisition is inferred to likely enhance market power - to devise divestiture structural remedies. We also provide an empirical application of the two proposed generalized indicators to several acquisitions in the wet shaving industry, with the objective of providing practitioners with a step-by-step illustration of how to compute them in antitrust cases. JEL Classification: L13, L41, L66. Keywords: Antitrust, Partial Horizontal Acquisitions, Oligopoly, Screening Indicators, HHI, GUPPI, Corporate Control, Banzhaf Power Index

Suggested Citation

  • Brito, Duarte & Osório, António (António Miguel) & Ribeiro, Ricardo & Vasconcelos, Helder,, 2018. "Unilateral Effects Screens for Partial Horizontal Acquisitions: The Generalized HHI and GUPPI," Working Papers 2072/321560, Universitat Rovira i Virgili, Department of Economics.
  • Handle: RePEc:urv:wpaper:2072/321560
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2072/321560
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Vasconcelos, Helder & Brito, Duarte & Ribeiro, Ricardo, 2013. "Measuring Unilateral Effects in Partial Acquisitions," CEPR Discussion Papers 9354, C.E.P.R. Discussion Papers.
    2. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    3. Azar, José, 2017. "Portfolio Diversification, Market Power, and the Theory of the Firm," IESE Research Papers D/1170, IESE Business School.
    4. Stefania Vitali & James B Glattfelder & Stefano Battiston, 2011. "The Network of Global Corporate Control," PLOS ONE, Public Library of Science, vol. 6(10), pages 1-6, October.
    5. Dennis Leech, 2002. "An Empirical Comparison of the Performance of Classical Power Indices," Political Studies, Political Studies Association, vol. 50(1), pages 1-22, March.
    6. Marie Goppelsroeder & Maarten Pieter Schinkel & Jan Tuinstra, 2008. "Quantifying The Scope For Efficiency Defense In Merger Control: The Werden‐Froeb‐Index," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 778-808, December.
    7. Levy, Marc, 2011. "The Banzhaf index in complete and incomplete shareholding structures: A new algorithm," European Journal of Operational Research, Elsevier, vol. 215(2), pages 411-421, December.
    8. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2014. "Measuring unilateral effects in partial horizontal acquisitions," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 22-36.
    9. Javier Campos & Gilberto Vega, 2003. "Concentration Measurement Under Cross-ownership: The Case of the Spanish Electricity Sector," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 313-335, December.
    10. Victor Dorofeenko & Larry Lang & Klaus Ritzberger & Jamsheed Shorish, 2008. "Who controls Allianz?," Annals of Finance, Springer, vol. 4(1), pages 75-103, January.
    11. Hausman, Jerry & Moresi, Serge & Rainey, Mark, 2011. "Unilateral effects of mergers with general linear demand," Economics Letters, Elsevier, vol. 111(2), pages 119-121, May.
    12. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Quantifying the coordinated effects of partial horizontal acquisitions," European Economic Review, Elsevier, vol. 110(C), pages 108-149.
    13. Sonia Jaffe & E. Glen Weyl, 2013. "The First-Order Approach to Merger Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 188-218, November.
    14. 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, vol. 10(1), pages 1-41, March.
    15. Reynolds, Robert J. & Snapp, Bruce R., 1986. "The competitive effects of partial equity interests and joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 141-153, June.
    16. Murata, Yasuo, 1977. "Mathematics for Stability and Optimization of Economic Systems," Elsevier Monographs, Elsevier, edition 1, number 9780125112505 edited by Shell, Karl.
    17. Brito, Duarte & Cabral, Luís & Vasconcelos, Helder, 2014. "Divesting ownership in a rival," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 9-24.
    18. Shapley, L. S. & Shubik, Martin, 1954. "A Method for Evaluating the Distribution of Power in a Committee System," American Political Science Review, Cambridge University Press, vol. 48(3), pages 787-792, September.
    19. Azar, José & Schmalz, Martin & Tecu, Isabel, 2017. "Anti-Competitive Effects of Common Ownership," IESE Research Papers D/1169, IESE Business School.
    20. Adelman, M A, 1969. "Comment on the "H" Concentration Measure as a Numbers-Equivalent," The Review of Economics and Statistics, MIT Press, vol. 51(1), pages 99-101, February.
    21. Bresnahan, Timothy F. & Salop, Steven C., 1986. "Quantifying the competitive effects of production joint ventures," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 155-175, June.
    22. Dietzenbacher, Erik & Smid, Bert & Volkerink, Bjorn, 2000. "Horizontal integration in the Dutch financial sector," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1223-1242, December.
    23. Kamada, Yuichiro & Kojima, Fuhito, 2013. "The equivalence between costly and probabilistic voting models," Games and Economic Behavior, Elsevier, vol. 80(C), pages 179-185.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lømo, Teis Lunde, 2024. "Overlapping ownership, pass-through, and product differentiation," Economics Letters, Elsevier, vol. 237(C).
    2. José Azar & Xavier Vives, 2018. "Oligopoly, Macroeconomic Performance, and Competition Policy," CESifo Working Paper Series 7189, CESifo.
    3. Miguel Antón & Florian Ederer & Mireia Giné & Martin Schmalz, 2023. "Common Ownership, Competition, and Top Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 131(5), pages 1294-1355.
    4. Duarte Brito & Einer Elhauge & Ricardo Ribeiro & Helder Vasconcelos, 2018. "Modeling Horizontal Shareholding with Ownership Dispersion," Working Papers de Economia (Economics Working Papers) 01, Católica Porto Business School, Universidade Católica Portuguesa.
    5. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Quantifying the coordinated effects of partial horizontal acquisitions," European Economic Review, Elsevier, vol. 110(C), pages 108-149.
    6. José Azar & Xavier Vives, 2021. "General Equilibrium Oligopoly and Ownership Structure," Econometrica, Econometric Society, vol. 89(3), pages 999-1048, May.
    7. Hassan Benchekroun & Miao Dai & Ngo Van Long, 2020. "On the Profitability of Cross-Ownership in Cournot Oligopolies: Stock Sizes Matter," CIRANO Working Papers 2020s-43, CIRANO.
    8. Brito, Duarte & Elhauge, Einer & Ribeiro, Ricardo & Vasconcelos, Helder, 2023. "Modelling the objective function of managers in the presence of overlapping shareholding," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    9. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2020. "Overlapping ownership, endogenous quality, and welfare," Economics Letters, Elsevier, vol. 190(C).
    10. Moreno, Diego & Petrakis, Emmanuel, 2022. "The impact on market outcomes of the portfolio selection of large equity investors," Economics Letters, Elsevier, vol. 212(C).
    11. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2019. "Can partial horizontal ownership lessen competition more than a monopoly?," Economics Letters, Elsevier, vol. 176(C), pages 90-95.
    12. Dai, Miao & Benchekroun, Hassan & Long, Ngo Van, 2022. "On the profitability of cross-ownership in Cournot nonrenewable resource oligopolies: Stock size matters," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    13. Vives, Xavier, 2020. "Common ownership, market power, and innovation," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    14. Heijnen, Pim & Schoonbeek, Lambert, 2020. "Cross-shareholdings and competition in a rent-seeking contest," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    15. José Azar & Sahil Raina & Martin Schmalz, 2022. "Ultimate ownership and bank competition," Financial Management, Financial Management Association International, vol. 51(1), pages 227-269, March.
    16. Filomena Garcia & Jose Manuel Paz y Miño & Gustavo Torrens, 2020. "The merger paradox, collusion, and competition policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 2051-2081, December.
    17. Oz Shy & Rune Stenbacka, 2020. "Common ownership, institutional investors, and welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 706-723, July.
    18. Panagiotis N. Fotis & Michael L. Polemis & Konstantinos Eleftheriou, 2017. "Unilateral effects of partial acquisitions: consistent calculation of GUPPI under horizontal merger guidelines within the EU," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(3), pages 315-325, September.
    19. Hunold, Matthias & Schlütter, Frank, 2019. "Vertical financial interest and corporate influence," DICE Discussion Papers 309, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Quantifying the coordinated effects of partial horizontal acquisitions," European Economic Review, Elsevier, vol. 110(C), pages 108-149.
    2. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2014. "Measuring unilateral effects in partial horizontal acquisitions," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 22-36.
    3. Sven Heim & Kai Hhschelrath & Ulrich Laitenberger & Yossi Spiegel, 2017. "Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs," Working Papers hal-01952937, HAL.
    4. Panagiotis N. Fotis & Michael L. Polemis & Konstantinos Eleftheriou, 2017. "Unilateral effects of partial acquisitions: consistent calculation of GUPPI under horizontal merger guidelines within the EU," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(3), pages 315-325, September.
    5. Dai, Miao & Benchekroun, Hassan & Long, Ngo Van, 2022. "On the profitability of cross-ownership in Cournot nonrenewable resource oligopolies: Stock size matters," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    6. Brito, Duarte & Elhauge, Einer & Ribeiro, Ricardo & Vasconcelos, Helder, 2023. "Modelling the objective function of managers in the presence of overlapping shareholding," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    7. Hariskos, W. & Königstein, M. & Papadopoulos, K.G., 2022. "Anti-competitive effects of partial cross-ownership: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 399-409.
    8. Azar, José & Schmalz, Martin & Tecu, Isabel, 2017. "Anti-Competitive Effects of Common Ownership," IESE Research Papers D/1169, IESE Business School.
    9. Newham, M. & Seldeslachts, J. & Banal-Estanol, A., 2018. "Common Ownership and Market Entry: Evidence from the Pharmaceutical Industry," Working Papers 18/03, Department of Economics, City University London.
    10. Robert Willig, 2011. "Unilateral Competitive Effects of Mergers: Upward Pricing Pressure, Product Quality, and Other Extensions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 19-38, August.
    11. Li, Youping & Zhang, Jianhu, 2021. "Product positioning with overlapping ownership," Economics Letters, Elsevier, vol. 208(C).
    12. Baltzopoulos, Apostolos & Kim, Jaewon & Mandorff, Martin, 2015. "UPP Analysis in Five Recent Merger Cases," Konkurrensverket Working Paper Series in Law and Economics 2015:3, Konkurrensverket (Swedish Competition Authority).
    13. José Azar & Xavier Vives, 2021. "General Equilibrium Oligopoly and Ownership Structure," Econometrica, Econometric Society, vol. 89(3), pages 999-1048, May.
    14. Benndorf, Volker & Odenkirchen, Johannes, 2021. "An experiment on partial cross-ownership in oligopolistic markets," International Journal of Industrial Organization, Elsevier, vol. 78(C).
    15. Erik Dietzenbacher & Umed Temurshoev, 2008. "Ownership relations in the presence of cross-shareholding," Journal of Economics, Springer, vol. 95(3), pages 189-212, December.
    16. Vasconcelos, Helder & Brito, Duarte & Ribeiro, Ricardo, 2013. "Measuring Unilateral Effects in Partial Acquisitions," CEPR Discussion Papers 9354, C.E.P.R. Discussion Papers.
    17. Vives, Xavier, 2020. "Common ownership, market power, and innovation," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    18. Heijnen, Pim & Schoonbeek, Lambert, 2020. "Cross-shareholdings and competition in a rent-seeking contest," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    19. Takayuki Mizuno & Shohei Doi & Shuhei Kurizaki, 2020. "The power of corporate control in the global ownership network," PLOS ONE, Public Library of Science, vol. 15(8), pages 1-19, August.
    20. Ángel L. López & Xavier Vives, 2019. "Overlapping Ownership, R&D Spillovers, and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2394-2437.

    More about this item

    Keywords

    Oligopolis; Competència econòmica -- Dret i legislació; 33 - Economia;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:urv:wpaper:2072/321560. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ariadna Casals (email available below). General contact details of provider: https://edirc.repec.org/data/deurves.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.