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The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies

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  • Orley Ashenfelter
  • Daniel Hosken

Abstract

In this paper we propose a method to evaluate the effectiveness of U.S. horizontal merger policy and apply it to the study of five recent consumer product mergers. We selected the mergers from those that, from the public record, seemed to be most problematic for the antitrust agencies. Thus we estimate an upper bound on the likely price effect of completed mergers. Our study employs retail scanner data and uses familiar panel data program evaluation procedures to measure price changes. Our results indicate that four of the five mergers resulted in some increases in consumer prices, while the fifth merger had little effect.

Suggested Citation

  • Orley Ashenfelter & Daniel Hosken, 2008. "The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies," NBER Working Papers 13859, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13859
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    1. Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.
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    Cited by:

    1. Oliver Budzinski, 2009. "Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits," Working Papers 93/09, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    2. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 3-30, Spring.
    3. Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009. "Generating Evidence to Guide Merger Enforcement," CPI Journal, Competition Policy International, vol. 5.
    4. repec:kap:decono:v:166:y:2018:i:1:d:10.1007_s10645-017-9308-5 is not listed on IDEAS
    5. Unknown & Dennis Carlton, 2009. "Why We Need to Measure the Effect of Merger Policy and How to Do It," CPI Journal, Competition Policy International, vol. 5.
    6. Oliver Budzinski & Isabel Ruhmer, 2010. "Merger Simulation In Competition Policy: A Survey," Journal of Competition Law and Economics, Oxford University Press, vol. 6(2), pages 277-319.
    7. Jürgen Janger, 2008. "Supply-Side Triggers for Inflation in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 34-69.
    8. Andrew Sweeting, 2010. "The effects of mergers on product positioning: evidence from the music radio industry," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 372-397.
    9. Packalen, Mikko & Sen, Anindya, 2013. "Static and dynamic merger effects: A market share based empirical analysis," International Review of Law and Economics, Elsevier, vol. 36(C), pages 12-24.
    10. Björnerstedt, Jonas & Verboven, Frank, 2012. "Does Merger Simulation Work? A "Natural Experiment" in the Swedish Analgesics Market Market," CEPR Discussion Papers 9027, C.E.P.R. Discussion Papers.
    11. Caroline Elliott & Yingqi Wei, 2010. "The Impact of Regulatory Intervention in the UK Store Card Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(1), pages 87-98.
    12. Humber, Jacob, 2014. "Mergers and Market Power in the US Nitrogen Fertilizer Industry," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170667, Agricultural and Applied Economics Association.
    13. Michael Salinger, 2011. "The 2010 Revised Merger Guidelines and Modern Industrial Economics," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 159-168, August.
    14. Hüschelrath, Kai, 2009. "Methodologische Grundlagen einer Evaluation von Wettbewerbspolitik," ZEW Discussion Papers 09-084, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    15. Aviv Nevo & Michael D. Whinston, 2010. "Taking the Dogma out of Econometrics: Structural Modeling and Credible Inference," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 69-82, Spring.
    16. Paul W. Dobson & Claudio A. Piga, 2009. "Mergers and Business Model Assimilation: Evidence from Low-Cost Airlines Takeovers," Discussion Paper Series 2009_2, Department of Economics, Loughborough University, revised Feb 2009.
    17. Huse, Cristian & Koptyug, Nikita, 2016. "Bailing on the car that wasn’t bailed out: bounding consumer reactions to financial distress," MPRA Paper 72796, University Library of Munich, Germany.
    18. Oliver Budzinski, 2010. "An Institutional Analysis of the Enforcement Problems in Merger Control," Working Papers 101/10, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.
    19. Keith Hylton, 2011. "Brown Shoe Versus the Horizontal Merger Guidelines," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 95-106, August.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products

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