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Why We Need to Measure the Effect of Merger Policy and How to Do It

  • Dennis W. Carlton

In this article, I explain the inadequacy of our current state of knowledge regarding the effectiveness of antitrust policy towards mergers. I then discuss the types of data that one must collect in order to be able to perform an analysis of the effectiveness of antitrust policy. There are two types of data one requires in order to perform such an analysis. One is data on the relevant market pre and post merger. The second is data on the specific predictions of the government agencies about the market post-merger. A key point of this article is to stress how weak an analysis of only the first type of data is. The frequent call for retrospective studies typically envisions relying on just this type of data, but the limitations on the analysis are not well understood. As I explain below, retrospective studies that ask whether prices went up post merger are surprisingly poor guides for analyzing merger policy. It is only when the second type of data is combined with the first type that a reliable analysis of antitrust policy can be carried out. There is a need both to collect the necessary data and to analyze it correctly.

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File URL: http://www.nber.org/papers/w14719.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14719.

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Date of creation: Feb 2009
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:14719
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  1. 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.
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