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“Mergers and difference-in-difference estimator: why firms do not increase prices?”

  • Juan Luis Jiménez

    ()

    (Facultad de Economía, Empresa y Turismo. Universidad de Las Palmas de Gran Canaria)

  • Jordi Perdiguero

    ()

    (Faculty of Economics, University of Barcelona)

Difference-in-Difference (DiD) methods are being increasingly used to analyze the impact of mergers on pricing and other market equilibrium outcomes. Using evidence from an exogenous merger between two retail gasoline companies in a specific market in Spain, this paper shows how concentration did not lead to a price increase. In fact, the conjectural variation model concludes that the existence of a collusive agreement before and after the merger accounts for this result, rather than the existence of efficient gains. This result may explain empirical evidence reported in the literature according to which mergers between firms do not have significant effects on prices.

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File URL: http://www.ub.edu/irea/working_papers/2012/201205.pdf
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Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 201205.

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Length: 38 pages
Date of creation: Feb 2012
Date of revision: Feb 2012
Handle: RePEc:ira:wpaper:201205
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