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Evidence on the Accuracy of Merger Simulations

Author

Listed:
  • Matthew C. Weinberg

    (Drexel University)

  • Daniel Hosken

    (Federal Trade Commission)

Abstract

This paper evaluates the efficacy of a structural model of oligopoly used for merger review. Using premerger data, we estimate several demand systems and use a static Bertrand model to simulate the price effects of two mergers. Using pre- and postmerger data, we directly estimate the price effects. The direct estimates imply that one merger resulted in moderate price increases, while the second left prices essentially unchanged. While some simulations are similar to the directly estimated price effects, overall simulations overstate the price effects in one case and understate them in the other. Explanations for the discrepancies are explored. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Matthew C. Weinberg & Daniel Hosken, 2013. "Evidence on the Accuracy of Merger Simulations," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1584-1600, December.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:5:p:1584-1600
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    More about this item

    Keywords

    mergers; price effects; simulations;
    All these keywords.

    JEL classification:

    • L00 - Industrial Organization - - General - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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