Equilibrium Price Dispersion, Mergers and Synergies: An Experimental Investigation of Differentiated Product Competition
This paper reports an experiment conducted to examine market performance and mergers in an asymmetric differentiated product oligopoly. We find that static Nash predictions organize mean market outcomes reasonably well. Markets on average respond to horizontal mergers with price increases as predicted and marginal cost synergies exert the predicted the power-mitigating price effects. Nash predictions, however, organize outcomes for specific markets and for the different firm-types less precisely. The variability of individual markets and firm-level decisions undermine the predictive capacity of merger simulations conducted with the Antitrust Logit Model, a merger device used by US antitrust authorities to help identify problematic mergers.
Volume (Year): 13 (2006)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/CIJB20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CIJB20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bart Wilson, 1998. "What Collusion? Unilateral Market Power as a Catalyst for Countercyclical Markups," Experimental Economics, Springer;Economic Science Association, vol. 1(2), pages 133-145, September.
- Vernon Smith, 2002. "Method in Experiment: Rhetoric and Reality," Experimental Economics, Springer;Economic Science Association, vol. 5(2), pages 91-110, October.
- Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
- Werden, G.J. & G.J. & Froeb, L.M., 1995. "Simulation as an Alternative to Structural Merger Policy in Differentiated Products Industries," Papers 95-02, U.S. Department of Justice - Antitrust Division.
- Douglas D. Davis & Bart J. Wilson, 2000. "Firm-specific cost savings and market power," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 545-565.
- Davis, Douglas D., 2002. "Strategic interactions, market information and predicting the effects of mergers in differentiated product markets," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1277-1312, November.
- Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1998.
"Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?,"
- Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January.
- Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 407-26, October.
When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:13:y:2006:i:2:p:169-194. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.