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Consequences of model choice in predicting horizontal merger effects

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  • Panhans, Matthew T.
  • Taragin, Charles

Abstract

How practitioners model competition influences the predicted effects of a merger. We show how a Bertrand price setting and a second score auction model can be nested within a general bargaining framework. Through numerical simulations, we then show how the predicted merger effects vary with model choice, and that two commonly used strategies for obtaining demand parameters can yield markedly different outcomes across the models. Finally, we show how model and calibration strategy choices affect the magnitude of predicted harm in the 2012 Bazaarvoice/PowerReviews merger.

Suggested Citation

  • Panhans, Matthew T. & Taragin, Charles, 2023. "Consequences of model choice in predicting horizontal merger effects," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:indorg:v:89:y:2023:i:c:s016771872300067x
    DOI: 10.1016/j.ijindorg.2023.102986
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    References listed on IDEAS

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    More about this item

    Keywords

    Bargaining models; Merger simulation; Horizontal markets;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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