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Quantifying the coordinated effects of partial horizontal acquisitions

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  • Brito, Duarte
  • 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 an empirical structural methodology, which can deal with settings involving all types of owners and ownership rights, to quantify the coordinated effects of partial horizontal acquisitions on differentiated products industries, by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained. We also provide an empirical application of the methodology to several acquisitions in the wet shaving industry that give rise to cross- and common-ownership structures. The results are as follows (i) the incentives to coordinate of the firms that the acquiring party is – pre-acquisition – able to influence are non-decreasing with any acquisition; (ii) the incentives to coordinate of the acquired firm are non-decreasing with acquisitions involving full or partial both financial and corporate control rights, but non-increasing with acquisitions involving full or partial solely financial rights; and (iii) the incentives to coordinate of the remaining firms in the industry are non-increasing with any acquisition. This implies that the coordinated effects of partial horizontal acquisitions are, in general, ambiguous, which illustrates the importance of an empirical structural methodology.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:eecrev:v:110:y:2018:i:c:p:108-149
    DOI: 10.1016/j.euroecorev.2018.07.009
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    Cited by:

    1. Ivaldi, Marc & Lagos, Vicente, 2016. "Assessment of Post-merger Coordinated Effects: Characterization by Simulations," CEPR Discussion Papers 11218, C.E.P.R. Discussion Papers.
    2. 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.
    3. Brito, Duarte & Osório, António & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Unilateral effects screens for partial horizontal acquisitions: The generalized HHI and GUPPI," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 127-189.
    4. Ivaldi, Marc & Lagos, Vicente, 2018. "How Accurate is the Coordinate Price Pressure Index to Predict Mergers’ Coordinated Effects?," TSE Working Papers 18-915, Toulouse School of Economics (TSE).
    5. Martin C. Schmalz, 2018. "Common-Ownership Concentration and Corporate Conduct," CESifo Working Paper Series 6908, CESifo.
    6. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2013. "Measuring Unilateral Effects in Partial Acquisitions," CEPR Discussion Papers 9354, C.E.P.R. Discussion Papers.
    7. Francesco Pasimeni, 2020. "The Origin of the Sharing Economy Meets the Legacy of Fractional Ownership," SPRU Working Paper Series 2020-19, SPRU - Science Policy Research Unit, University of Sussex Business School.
    8. Lagos, Vicente, 2017. "Assessment of post-merger coordinated effects: Characterization by simulationsAuthor-Name: Ivaldi, Marc," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 267-305.
    9. 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.

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    More about this item

    Keywords

    Antitrust; Coordinated effects; Partial acquisitions; Oligopoly; Differentiated products; Demand estimation;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • 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

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