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Post-merger price dynamics matter, so why do merger retrospectives ignore them?

Author

Listed:
  • Franco Mariuzzo

    (Centre for Competition Policy and School of Economics, University of East Anglia)

  • Peter L. Ormosi

    (Centre for Competition Policy and Norwich Business School, University of East Anglia)

Abstract

The price effect of past mergers has been extensively researched over the last two decades. The overwhelming majority of these studies pool post-merger data to estimate the average price effect of a merger. Merger guidelines agree that mergers should be approved if market dynamics, such as entry, eliminate negative welfare effects. However, pooled post-merger data ignore key information about price dynamics and are unable to identify if post-merger prices eventually revert to pre-merger levels or drift away. We provide evidence, from a meta-analysis of previous works, and a set of Monte Carlo experiments, on how serious this problem is. Finally, we show the conditions where pooled data studies make an erroneous conclusion about the merger.

Suggested Citation

  • Franco Mariuzzo & Peter L. Ormosi, 2017. "Post-merger price dynamics matter, so why do merger retrospectives ignore them?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2016-05, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaccp:2016_05
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    mergers; merger retrospectives; meta study; Monte Carlo simulation;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other

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