Horizontal Mergers of Online Firms: Structural Estimation and Competitive Effects
This paper (1) presents a general model of online price competition, (2) shows how to structurally estimate the underlying parameters of the model when the number of competing firms is unknown or in dispute, (3) estimates these parameters based on UK data for personal digital assistants, and (4) uses these estimates to simulate the competitive effects of horizontal mergers. Our results suggest that competitive effects in this online market are more closely aligned with the simple homogeneous product Bertrand model than might be expected given the observed price dispersion and number of firms. Our estimates indicate that so long as two firms remain in the market post merger, the average transaction price is roughly unaffected by horizontal mergers. However, there are potential distributional effects; our estimates indicate that a three-to-two merger raises the average transaction price paid by price sensitive "shoppers" by 2.88 percent, while lowering the average transaction price paid by consumers "loyal" to a particular firm by 1.37 percent.
|Date of creation:||Jul 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.econ.jhu.edu
More information through EDIRC
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.:
- Yingyao Hu & Matthew Shum, 2007.
"Estimating First-Price Auctions with an Unknown Number of Bidders: A Misclassification Approach,"
Economics Working Paper Archive
541, The Johns Hopkins University,Department of Economics.
- An, Yonghong & Hu, Yingyao & Shum, Matthew, 2010. "Estimating first-price auctions with an unknown number of bidders: A misclassification approach," Journal of Econometrics, Elsevier, vol. 157(2), pages 328-341, August.
- Armstrong, Mark, 2008. "Interactions between competition and consumer policy," MPRA Paper 7258, University Library of Munich, Germany.
- Baye, Michael & Morgan, John, 2004.
"Brand and Price Advertising in Online Markets,"
Competition Policy Center, Working Paper Series
qt9760k3hz, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Michael R. Baye & John Morgan, 2005. "Brand and Price Advertising in Online Markets," Working Papers 2005-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Michael Baye & John Morgan, 2005. "Brand and Price Advertising in Online Markets," Microeconomics 0504009, EconWPA.
- Michael R. Baye & John Morgan & Patrick Scholten, 2004.
"Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(4), pages 463-496, December.
- Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site," Working Papers 2004-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
- Baye, Michael R & Gatti, J. Rupert J & Kattuman, Paul & Morgan, John, 2006.
"Clicks, Discontinuities, and Firm Demand Online,"
Competition Policy Center, Working Paper Series
qt3qg7270w, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- repec:dgr:uvatin:20060019 is not listed on IDEAS
- Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Ganesh Iyer & David Soberman & J. Miguel Villas-Boas, 2005. "The Targeting of Advertising," Marketing Science, INFORMS, vol. 24(3), pages 461-476, May.
- Hu, Yingyao, 2008. "Identification and estimation of nonlinear models with misclassification error using instrumental variables: A general solution," Journal of Econometrics, Elsevier, vol. 144(1), pages 27-61, May.
- Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September.
When requesting a correction, please mention this item's handle: RePEc:jhu:papers:564. 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: (None)The email address of this maintainer does not seem to be valid anymore. Please ask None to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.