IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A Random Coefficients Logit Analysis of the Counterfactual: A Merger and Divestiture in the Australian Cigarette Industry

  • Vivienne Pham

    ()

    (School Economics, La Trobe University)

  • David Prentice

    ()

    (School of Economics, La Trobe University)

In this paper we empirically analyse two counterfactual situations facing an antitrust au- thority following the merger of two of the largest international cigarette companies. First we estimate a random coecients model of demand for cigarettes. The implied elasticity of demand for smoking and implied marginal costs are consistent with the independent estimates available. We then use the model to simulate the proposed merger and the partial divesti- ture that was accepted by the Australian antitrust authority. A comparison of the relative price changes predicted by the divestiture simulation with the actual post-divestiture price changes shows that the model is partially successful in predicting the ranking of price changes across companies following the divestiture. This suggests structural econometric analysis us- ing a random coecients model can provide information for antitrust authorities assessing the implications of a potential merger and partial divestiture.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0003/318711/2013.04.pdf
File Function: first version, 2013.04.pdf
Download Restriction: no

File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0003/318711/2013.04.pdf
File Function: Revised version, 2013.04.pdf
Download Restriction: no

Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2013.04.

as
in new window

Length: 49 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:trb:wpaper:2013.04
Note: ISSN-1837-2198
Contact details of provider: Web page: http://www.latrobe.edu.au/economics

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Pham, Vivienne & Prentice, David, 2010. "An empirical analysis of the counterfactual: a merger and divestiture in the Australian cigarette industry," MPRA Paper 26713, University Library of Munich, Germany.
  2. Nevo, Aviv, 1999. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Competition Policy Center, Working Paper Series qt7cm5p858, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  3. Harry Clarke & David Prentice, 2012. "Will Plain Packaging Reduce Cigarette Consumption?," Economic Papers, The Economic Society of Australia, vol. 31(3), pages 303-317, 09.
  4. Dongling Huang & Christian Rojas & Frank Bass, 2008. "WHAT HAPPENS WHEN DEMAND IS ESTIMATED WITH A MISSPECIFIED MODEL? -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 56(4), pages 809-839, December.
  5. Victor Aguirregabiria & Victor Aguirregabiria & Aviv Nevo & Aviv Nevo, 2010. "Recent Developments in Empirical IO: Dynamic Demand and Dynamic Games," Working Papers tecipa-419, University of Toronto, Department of Economics.
  6. Hendel, Igal, 1999. "Estimating Multiple-Discrete Choice Models: An Application to Computerization Returns," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 423-46, April.
  7. Jith Jayaratne & Carl Shapiro, 2000. "Simulating Partial Asset Divestitures to 'Fix' Mergers," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 7(2), pages 179-200.
  8. Peters, Craig, 2006. "Evaluating the Performance of Merger Simulation: Evidence from the U.S. Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 627-49, October.
  9. John Tauras & Richard Peck & Frank Chaloupka, 2006. "The Role of Retail Prices and Promotions in Determining Cigarette Brand Market Shares," Review of Industrial Organization, Springer, vol. 28(3), pages 253-284, 05.
  10. Philip Crooke & Luke Froeb & Steven Tschantz & Gregory Werden, 1999. "Effects of Assumed Demand Form on Simulated Postmerger Equilibria," Review of Industrial Organization, Springer, vol. 15(3), pages 205-217, November.
  11. Oliver Budzinski & Isabel Ruhmer, 2009. "Merger Simulation in Competition Policy: A Survey," Working Papers 82/09, University of Southern Denmark, Department of Environmental and Business Economics.
  12. Cohen, Andrew, 2008. "Package size and price discrimination in the paper towel market," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 502-516, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:trb:wpaper:2013.04. 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: (Stephen Scoglio)

The email address of this maintainer does not seem to be valid anymore. Please ask Stephen Scoglio to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.