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Merger Simulation: A Simplified Approach with New Applications

  • Roy J. Epstein

    (LECG, Inc)

  • Daniel L. Rubinfeld

    (University of California, Berkeley)

Merger simulation is growing in importance as a tool to evaluate the unilateral competitive effects of mergers. This paper offers a relatively non-technical description of the principles of merger simulation. In addition, it introduces PCAIDS, a new and highly flexible "calibrated-demand" merger simulation methodology that is based on a simplified version of AIDS. PCAIDS can be implemented using market shares and two price elasticities; scanner or transaction-level data are not required. The paper offers some applications of merger simulation with PCAIDS that include comparisons with other simulation models. It also shows how PCAIDS can be applied to the analysis of efficiencies, divestiture, and product repositioning/entry. Finally, the paper offers an analysis of the Merger Guidelines safeharbors. A detailed mathematical appendix is included.

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Paper provided by EconWPA in its series Industrial Organization with number 0201002.

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Length: 43 pages
Date of creation: 04 Jan 2002
Date of revision:
Handle: RePEc:wpa:wuwpio:0201002
Note: 43 pages, Acrobat .pdf
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