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Indicative Price Rise with synergies

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  • Voudon, Benoît

Abstract

This paper extends the evaluation of mergers’ unilateral effect on prices to incorporate the effect of variable cost synergies. The Indicative Price Rise metric was first introduced by Shapiro (1995), which allows to estimate the price increase caused by a merger based on pre-merger metrics such as prices, margins and diversion ratios. We derive the IPR formula including synergies for linear demand and isoelastic demand.

Suggested Citation

  • Voudon, Benoît, 2022. "Indicative Price Rise with synergies," Economics Letters, Elsevier, vol. 218(C).
    • Handle: RePEc:eee:ecolet:v:218:y:2022:i:c:s0165176522002543
    DOI: 10.1016/j.econlet.2022.110732
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    References listed on IDEAS

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    1. Miller, Nathan H. & Remer, Marc & Ryan, Conor & Sheu, Gloria, 2017. "Upward pricing pressure as a predictor of merger price effects," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 216-247.
    2. 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.
    3. Werden, Gregory J, 1996. "A Robust Test for Consumer Welfare Enhancing Mergers among Sellers of Differentiated Products," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 409-413, December.
    4. Tommaso Valletti & Hans Zenger, 2021. "Mergers with Differentiated Products: Where Do We Stand?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 179-212, February.
    5. Joseph Farrell & Carl Shapiro, 2011. "Upward Pricing Pressure and Critical Loss Analysis: Response," Antitrust Chronicle, Competition Policy International, vol. 1.
    6. 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.
    7. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Horizontal merger; Unilateral effects; Indicative Price Rise; Linear demand; Isoelastic demand;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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