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Separating the ex post effects of mergers: an analysis of structural changes on the Hungarian retail gasoline market

Author

Listed:
  • Gergely Csorba

    (Institute of Economics - Hungarian Academy of Sciences)

  • Gabor Koltay

    (DG for Economic and Financial Affairs of the European Commission)

  • David Farkas

    (Hungarian Competition Authority)

Abstract

This paper develops an empirical method to identify the price effects of simultaneous mergers and to separate the different effects on the prices of the buyer and seller firms and on the prices of their respective competitors. Our difference-in-differences approach exploits variation in the presence of merging firms across local markets to form different treatment-control group pairs in order to estimate separate effects for each type of firms affected by the mergers. We apply this method to provide an ex post evaluation of two almost simultaneous mergers in the Hungarian retail gasoline market. We show that both mergers resulted in a significantly positive but economically negligible price effect, but while the first merger affected only the prices of buyer firm's stations, the second had an effect on the prices of seller's stations and of its competitors. We also demonstrate that the results are not sensitive to the assumed dates when the mergers effectively change the firms' pricing policy.

Suggested Citation

  • Gergely Csorba & Gabor Koltay & David Farkas, 2011. "Separating the ex post effects of mergers: an analysis of structural changes on the Hungarian retail gasoline market," CERS-IE WORKING PAPERS 1118, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:discpr:1118
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    References listed on IDEAS

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    1. Robin A. Prager & Timothy H. Hannan, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence From The Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-452, December.
    2. Philippe Choné & Laurent Linnemer, 2012. "A Treatment Effect Method for Merger Analysis with an Application to Parking Prices in P aris," Journal of Industrial Economics, Wiley Blackwell, vol. 60(4), pages 631-656, December.
    3. Ali Hortaçsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Journal of Political Economy, University of Chicago Press, vol. 115, pages 250-301.
    4. Olivier Armantier & Oliver Richard, 2008. "Domestic airline alliances and consumer welfare," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 875-904, September.
    5. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-569, June.
    6. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2005. "Market Size Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 1-25, March.
    7. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-452, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Emilie Dargaud & Carlo Reggiani, 2015. "On The Price Effects Of Horizontal Mergers: A Theoretical Interpretation," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 236-255, July.
    2. Gábor Békés & Péter Harasztosi, 2018. "Grid and shake: spatial aggregation and the robustness of regionally estimated elasticities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 60(1), pages 143-170, January.
    3. Erdős, Katalin & Baczur, Roland & Kehl, Dániel & Farkas, Richárd, 2022. "When post-merger price effect becomes smoothed over time: A case of a gasoline market merger," Energy Economics, Elsevier, vol. 105(C).
    4. Franco Mariuzzo & Peter L. Ormosi, 2017. "Post-merger price dynamics matter, so why do merger retrospectives ignore them?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2016-05, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    5. Farkas, Richárd, 2017. "Empirikus reakciógörbe-becslés a magyar kiskereskedelmi benzinpiacon [Estimating empirical reaction functions in the Hungarian retail gasoline market]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 267-284.
    6. Csorba, Gergely & Koltay, Gábor & Farkas, Dávid, 2009. "Árak és koncentráció a magyar kiskereskedelmi üzemanyagpiacon [Prices and concentration on the Hungarian retail market for motor fuels]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1088-1109.
    7. Farkas, Richárd & Yontcheva, Biliana, 2019. "Price transmission in the presence of a vertically integrated dominant firm: Evidence from the gasoline market," Energy Policy, Elsevier, vol. 126(C), pages 223-237.

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    More about this item

    Keywords

    ex post evaluation; mergers; difference-in-differences estimation; treatment effects; retail gasoline;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other

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