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Publication Date:
March 2010
ISSN:
1935-1704
DOI:
10.2202/1935-1704.1563

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Ed. by Cervellati, Matteo / Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Schipper, Burkhard

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Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition

Joseph Farrell1 / Carl Shapiro2

1University of California, Berkeley, farrell@econ.berkeley.edu

2University of California, Berkeley, shapiro@haas.berkeley.edu

Citation Information: The B.E. Journal of Theoretical Economics. Volume 10, Issue 1, Pages –, ISSN (Online) 1935-1704, DOI: 10.2202/1935-1704.1563, March 2010

Publication History:
Published Online:
2010-03-19

We describe a simple initial indicator of whether a proposed merger between rivals in a differentiated product industry is likely to raise prices through unilateral effects. Our diagnostic calibrates upward pricing pressure (UPP) resulting from the merger, based on the price/cost margins of the merging firms' products and the extent of direct substitution between them. As a screen for likely unilateral effects, this approach is practical, more transparent, and better grounded in economics than are concentration-based methods.

Keywords: mergers; antitrust; oligopoly; unilateral effects

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