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Unilateral Effects of Mergers that Enhance Product Quality

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  • Bertram Neurohr

    (Oxera)

Abstract

This article derives simple and intuitive formulas for calculating the effects that mergers that enhance product quality have on nominal and hedonic prices. If the value of quality enhancements can be estimated, the formulas proposed here can be applied using data realistically available in the merger investigations context and should therefore be valuable additions to the practitioner’s toolbox. This article also explores strategic effects between the merged entity and non-merging rivals in the presence of merger-specific quality enhancements, and it highlights the importance in ex post merger assessments of paying close attention to non-merging rivals’ price responses to the merger.

Suggested Citation

  • Bertram Neurohr, 2022. "Unilateral Effects of Mergers that Enhance Product Quality," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(4), pages 587-596, June.
    • Handle: RePEc:kap:revind:v:60:y:2022:i:4:d:10.1007_s11151-022-09859-w
    DOI: 10.1007/s11151-022-09859-w
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    References listed on IDEAS

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    1. Werden, Gregory J, 1996. "A Robust Test for Consumer Welfare Enhancing Mergers among Sellers of Differentiated Products," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 409-413, December.
    2. Choné, Philippe & Linnemer, Laurent, 2020. "Linear demand systems for differentiated goods: Overview and user’s guide," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    3. Willig, Robert D., 1978. "Incremental consumer's surplus and hedonic price adjustment," Journal of Economic Theory, Elsevier, vol. 17(2), pages 227-253, April.
    4. Sonia Jaffe & E. Glen Weyl, 2013. "The First-Order Approach to Merger Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 188-218, November.
    5. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
    6. John Kwoka & Evgenia Shumilkina, 2010. "The Price Effect Of Eliminating Potential Competition: Evidence From An Airline Merger," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 767-793, December.
    7. Robert Willig, 2011. "Unilateral Competitive Effects of Mergers: Upward Pricing Pressure, Product Quality, and Other Extensions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 19-38, August.
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    Cited by:

    1. Bertram Neurohr, 2024. "Demand Elasticities and Volume Effects: Practical Formulas for Practitioners," Journal of Industry, Competition and Trade, Springer, vol. 24(1), pages 1-11, December.

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