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Evaluating Mergers and Divestitures: A Casino Case Study

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  • F David Osinski
  • Jeremy A Sandford

Abstract

Despite frequent use in practice, merger remedies receive little attention in the economics literature. We analyze the 2013 merger of two casino operators and the subsequent divestiture of one St. Louis casino. Using public data from the Missouri Gaming Commission, we employ a difference-in-difference framework with other Missouri casinos as the control group to estimate separate effects of the merger and divestiture on each St. Louis casino. Results indicate the merged firm benefited from efficiencies, resulting in lower prices and higher quantity; however, the divested casino performed worse than before the merger. Synthetic control estimates confirm these results. This study raises questions about whether to assess remedies by the performance of the divested asset or the consumer welfare of the entire merger. It also raises questions regarding remedy endogeneity: do firms face incentives to offer declining assets? Both have applicability beyond this case, supporting the need for further research. (JEL L1, L4)

Suggested Citation

  • F David Osinski & Jeremy A Sandford, 2021. "Evaluating Mergers and Divestitures: A Casino Case Study," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 37(2), pages 239-277.
    • Handle: RePEc:oup:jleorg:v:37:y:2021:i:2:p:239-277.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewaa013
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    Cited by:

    1. Richard Volpe & Maiah Alman & Xiaowei Cai & Alexander Stevens, 2022. "Retail Mergers and Acquisitions, and Specialty Crop Producers: Evidence from California," Sustainability, MDPI, vol. 14(7), pages 1-13, March.
    2. FUKASAWA Takeshi & OHASHI Hiroshi, 2023. "Long-run Effect of a Horizontal Merger and Its Remedial Standards," Discussion papers 23001, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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