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Using Retail Data For Upstream Merger Analysis

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  • Sofia Berto Villas-Boas

Abstract

The typical situation that antitrust authorities face is to analyze a proposed manufacturer merger using scanner data at retail level. I start with a benchmark model of manufacturers' and retailers' sequential pricing behavior. Then I perform counterfactual experiments to explore the relationship between downstream retailer pricing models and the resulting estimates of upstream mergers, in the absence of wholesale prices. Looking at scanner data for the ground coffee category sold at several retail chains in Germany, I find that not considering retail pricing explicitly when analyzing the potential consequences of an upstream merger results in simulated changes in welfare that are significantly different given the underlying model of retail pricing behavior. These findings are relevant for competition policy, and authorities should consider incorporating the role of retailers in upstream merger analyses, especially in the presence of increasingly consolidated retail food markets.

Suggested Citation

  • Sofia Berto Villas-Boas, 2007. "Using Retail Data For Upstream Merger Analysis," Journal of Competition Law and Economics, Oxford University Press, vol. 3(4), pages 689-715.
  • Handle: RePEc:oup:jcomle:v:3:y:2007:i:4:p:689-715.
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    Cited by:

    1. Hunold, Matthias & Laitenberger, Ulrich & Licht, Georg & Nikogosian, Vigen & Stenzel, André & Ullrich, Hannes & Wolf, Christoph, 2011. "Modernisierung der Konzentrationsberichterstattung: Endbericht," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110525.
    2. Cuiabano, Simone, 2017. "Competition Policy Evaluation through Damage Estimation in Fuel Retail Cartel," TSE Working Papers 17-847, Toulouse School of Economics (TSE).
    3. Nilsen, Øivind Anti & Sørgard, Lars & Ulsaker, Simen A., 2016. "Upstream merger in a successive oligopoly: Who pays the price?," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 143-172.
    4. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2013. "Inter-format competition among retailers: The role of private label products in market delineation," DICE Discussion Papers 101, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Kusum Ailawadi & Eric Bradlow & Michaela Draganska & Vincent Nijs & Robert Rooderkerk & K. Sudhir & Kenneth Wilbur & Jie Zhang, 2010. "Empirical models of manufacturer-retailer interaction: A review and agenda for future research," Marketing Letters, Springer, vol. 21(3), pages 273-285, September.
    6. Pofahl, Geoffrey M. & Carlson, Jared, 2010. "Evaluating the Unilateral Price and Variety Effects of Horizontal Mergers," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 62014, Agricultural and Applied Economics Association.

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