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Merger Control in Differentiated Product

Author

Listed:
  • Patrick Paul Walsh
  • Franco Mariuzzo
  • Ciara Whelan

    (Department of Economics, Trinity College)

Abstract

Thresholds defined on the level and change in the HHI (Herfindahl- Hirschmann Index) applied to market shares seem to be the main instrument to select notified mergers for investigation in both the EU and US. We question the use of such a selection rule in di?erentiated products industries. We propose the use of a structural approach to apply HHI thresholds based on profit shares rather than market shares. We illustrate our point using product data for Retail Carbonated Soft Drinks (Price, Market Share and Characteristics). We estimate company (product) mark-ups consistent with a structural model of equilibrium, using demand primitives from a Nested Logit model and a Random Coe?cient model. We provide an example where the HHI thresholds based on profit shares identify potentially damaging mergers not captured by applying thresholds to output shares, or conversely, identify mergers of no concern that would be selected on the basis of output shares.

Suggested Citation

  • Patrick Paul Walsh & Franco Mariuzzo & Ciara Whelan, 2005. "Merger Control in Differentiated Product," Trinity Economics Papers tep10, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep10
    as

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    File URL: http://www.tcd.ie/Economics/TEP/2005_papers/TEP10.pdf
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    References listed on IDEAS

    as
    1. repec:bla:jindec:v:47:y:1999:i:3:p:325-43 is not listed on IDEAS
    2. Patrick Paul Walsh & Franco Mariuzzo, 2005. "Embedding Consumer Taste for Location into a Structural Model of Equilibrium," Trinity Economics Papers 200053, Trinity College Dublin, Department of Economics.
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    6. Franco Mariuzzo & Patrick Walsh & Ciara Whelan, 2003. "Firm Size and Market Power in Carbonated Soft Drinks," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(3), pages 283-299, December.
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    10. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
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    12. Steven Berry & James Levinsohn & Ariel Pakes, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 68-105, February.
    13. Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random‐Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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