IDEAS home Printed from
   My bibliography  Save this paper

Antitrust Market De nition and the Sensitivity of the Diversion Ratio


  • Lydia Cheung

    () (School of Economics, Faculty of Business and Law, Auckland University of Technology)


The diversion ratio is a key ingredient for merger analysis, as mentioned in the new Horizontal Merger Guidelines (2010) in the U.S. and similar documents abroad. It is a measure of substitutability between merging goods, which determines the potential for price increase post-merger. There is little existing research on how the diversion ratio is to be estimated. This paper is the rst one to explore estimation issues through standard demand estimation techniques and how changes in the antitrust market de nition a ect the resultant diversion ratios. I use random draws of supermarket products from a supermarket dataset to show that the estimated diversion ratios are, in fact, not greatly a ected by market de nition. They have the same magnitude as baseline estimates and the rst signi cant gures vary within a small range.

Suggested Citation

  • Lydia Cheung, 2016. "Antitrust Market De nition and the Sensitivity of the Diversion Ratio," Working Papers 2016-02, Auckland University of Technology, Department of Economics.
  • Handle: RePEc:aut:wpaper:201602

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Farrell Joseph & Shapiro Carl, 2010. "Upward Pricing Pressure in Horizontal Merger Analysis: Reply to Epstein and Rubinfeld," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-9, September.
    2. Christopher T. Conlon & Julie Holland Mortimer, 2013. "Empirical Properties of Diversion Ratios," Boston College Working Papers in Economics 864, Boston College Department of Economics, revised 01 Jan 2019.
    3. Christopher T. Conlon & Julie Holland Mortimer, 2013. "An Experimental Approach to Merger Evaluation," NBER Working Papers 19703, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item


    horizontal merger; unilateral price e ect; di erentiated products; upward pricing pressure; diversion ratio; elasticity;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aut:wpaper:201602. 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: (Gail Pacheco). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.