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Licensed Unlicensed Requires Authentication Published by De Gruyter March 19, 2010

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

  • Joseph Farrell and Carl Shapiro

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.

Published Online: 2010-3-19

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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