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Merger Analysis with Latent Price

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  • Paul S. Koh

Abstract

Standard empirical tools for merger analysis assume price data, which may not be readily available. This paper characterizes sufficient conditions for identifying the unilateral effects of mergers without price data. I show that data on merging firms' revenues, margins, and revenue diversion ratios are sufficient for identifying the gross upward pricing pressure indices, compensating marginal cost reductions, and first-order welfare effects. Revenue diversion ratios can be identified from consumer expenditure data via the Hotz-Miller inversion under the standard discrete-continuous demand assumption. Merger simulations are also feasible with CES demand if data on all firms' margins and revenues are available. I use the proposed framework to evaluate the Albertsons/Safeway merger (2015) and the Staples/Office Depot merger (2016).

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  • Paul S. Koh, 2024. "Merger Analysis with Latent Price," Papers 2404.07684, arXiv.org, revised Jul 2024.
    • Handle: RePEc:arx:papers:2404.07684
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    References listed on IDEAS

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