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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ivaldi, Marc & Verboven, Frank, 2001.
"Quantifying the Effects from Horizontal Mergers in European Competition Policy,"
CEPR Discussion Papers, C.E.P.R. Discussion Papers
2697, C.E.P.R. Discussion Papers.
- Ivaldi, Marc & Verboven, Frank, 2005. "Quantifying the effects from horizontal mergers in European competition policy," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 23(9-10), pages 669-691, December.
- Pinkse, Joris & Slade, Margaret E., 2004. "Mergers, brand competition, and the price of a pint," European Economic Review, Elsevier, Elsevier, vol. 48(3), pages 617-643, June.
- Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, Econometric Society, vol. 70(3), pages 1111-1153, May.
- Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 10(2), pages 407-26, October.
- Hausman, Jerry A. & Leonard, Gregory K., 2005. "Using merger simulation models: Testing the underlying assumptions," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 23(9-10), pages 693-698, December.
- 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.
- Roy J. Epstein & Daniel L. Rubinfeld, 2002. "Merger Simulation: A Simplified Approach with New Applications," Industrial Organization, EconWPA 0201002, EconWPA.
- Slade, Margaret E, 1998. "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(448), pages 565-602, May.
- David Sibley & Ken Heyer, 2003. "Selected Economic Analysis at the Antitrust Division: The Year in Review," Review of Industrial Organization, Springer, Springer, vol. 23(2), pages 95-119, September.
- Francine Lafontaine & Margaret Slade, 2007.
"Vertical Integration and Firm Boundaries: The Evidence,"
Journal of Economic Literature, American Economic Association,
American Economic Association, vol. 45(3), pages 629-685, September.
- Lafontaine, Francine & Slade, Margaret, 2007. "Vertical Integration and Firm Boundaries : The Evidence," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 799, University of Warwick, Department of Economics.
- Oliver Budzinski & Isabel Ruhmer, 2008.
"Merger Simulation in Competition Policy: A Survey,"
MAGKS Papers on Economics, Philipps-UniversitÃ¤t Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)
200807, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- Oliver Budzinski & Isabel Ruhmer, 2009. "Merger Simulation in Competition Policy: A Survey," Working Papers, University of Southern Denmark, Department of Environmental and Business Economics 82/09, University of Southern Denmark, Department of Environmental and Business Economics.
- Friberg, Richard & Norbäck, Pehr-Johan & Persson, Lars, 2008. "Getting a Better Price: Strategic Behaviour before Changes in Ownership of Corporate Assets," Working Paper Series, Research Institute of Industrial Economics 777, Research Institute of Industrial Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helen Neal).
If references are entirely missing, you can add them using this form.