Merger Simulations of Unilateral Effects : What Can We Learn from the UK Brewing Industry?
AbstractI discuss the use of simulation techniques to evaluate unilateral effects of horizontal mergers and the pitfalls that one can encounter when using them. Simple econometric models are desirable because they can be implemented in a short period of time and can be understood by non experts. Unfortunately, their predictions are often misleading. Complex models are more reliable but they require more time to implement and are less transparent. The use of merger simulations and the sensitivity of predictions to modeling choices is illustrated with an application to mergers in the UK brewing industry. There have been a number of brewing mergers that have changed the structure of the UK market, as well as proposed but unconsummated mergers that would have had even more profound effects. I assess two of them: the successful merger between Scottish&Newcastle and Courage and the proposed merger between Bass and Carlsberg–Tetley.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 767.
Length: 40 pages
Date of creation: 2006
Date of revision:
Unilateral effects; horizontal merger simulations; UK brewing;
Find related papers by 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
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-28 (All new papers)
- NEP-CMP-2006-10-28 (Computational Economics)
- NEP-COM-2006-10-28 (Industrial Competition)
- NEP-CSE-2006-10-28 (Economics of Strategic Management)
- NEP-IND-2006-10-28 (Industrial Organization)
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