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Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition

Author

Listed:
  • Farrell Joseph

    () (University of California, Berkeley)

  • Shapiro Carl

    () (University of California, Berkeley)

Abstract

We describe a simple initial indicator of whether a proposed merger between rivals in a differentiated product industry is likely to raise prices through unilateral effects. Our diagnostic calibrates upward pricing pressure (UPP) resulting from the merger, based on the price/cost margins of the merging firms' products and the extent of direct substitution between them. As a screen for likely unilateral effects, this approach is practical, more transparent, and better grounded in economics than are concentration-based methods.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:9
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