Pass‐Through and the Prediction of Merger Price Effects

Miller, Nathan; Remer, Marc; Ryan, Conor; Sheu, Gloria

doi:10.1111/joie.12131

Cited by 30 publications

(30 citation statements)

References 37 publications

(40 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…See, for example,Hausman (2010),Carlton (2010),Schmalensee (2009),Willig (2011),Carlton and Israel (2010),Gotts (2010), andFarrell and Shapiro (2010).7 See, for example, Jaffe and Weyl (2013), which incorporates an estimated pass-through rate to map anticipated opportunity cost effects of a merger into price effects. In related work,Miller et al (2016) andCheung (2011) find that the price effects of a merger, and errors in predicting these effects, depend on the nature of competition among non-merging firms, and whether prices are strategic substitutes or strategic complements.…”

mentioning

confidence: 99%

Empirical Properties of Diversion Ratios

Conlon¹,

Mortimer²

2018

View full text Add to dashboard Cite

A diversion ratio, which measures the fraction of consumers that switch from one product to an alternative after a price increase, is a central calculation of interest to antitrust authorities for analyzing horizontal mergers. Two ways to measure diversion are: the ratio of estimated crossprice to own-price demand derivatives, and second-choice data. Policy-makers may be interested in either, depending on whether they are concerned about the potential for small but widespread price increases, or product discontinuations. We estimate diversion in two applications-using observational price variation and experimental second-choice data respectively-to illustrate the trade-offs between different empirical approaches. Using our estimates of diversion, we identify candidate products for divestiture in a hypothetical merger.

show abstract

mentioning

confidence: 99%

Empirical Properties of Diversion Ratios

Conlon¹,

Mortimer²

2018

View full text Add to dashboard Cite

show abstract

“…A comparison of merger simulated predictions with actual post-merger prices, as well comparisons of different demand models in merger simulations, have both been highlighted in the literature in the context of substitute goods (Crooke et al, 1999, Peters, 2006, Huang, Rojas and Bass, 2008, Weinberg, 2011, Weinberg and Hosken, 2013, Miller et al, 2016, Björnerstedt and Verboven, 2016. In the latter group, i.e.…”

Section: Merger Simulationsmentioning

confidence: 98%

Demand estimation and merger simulations for drugs: Logits v. AIDS

Bokhari

Mariuzzo

2018

International Journal of Industrial Organization

View full text Add to dashboard Cite

We use ADHD drugs sales data from 2000-2003 and compare estimates of elasticities and merger simulations from three different demand models. Models include logit, random coefficients logit, and conditional AIDS demand model with multistage budgeting. The magnitude of cross-price elasticities is larger in the third model in comparison to the first two, and some of the cross-price elasticities are estimated to be negative. Hypothetical merger simulations show larger price effects for the multistage AIDS model in comparison to the discrete choice models.

show abstract

“…The employment of pass-through in merger simulation techniques [7,21,22] has been much studied in academic settings as well as employed by practitioners in a litigious setting. [23] focus on the role pass-through may play in improving the prediction of post merger prices. [24] evaluates the performance of UPP as a merger screening tool in contrast to standard structural merger simulation by generating hypothetical mergers using US airline industry data.…”

Section: Literature Reviewmentioning

confidence: 99%

“…These are Logit demand, Log-Linear demand, Linear demand, and Almost Ideal demand. These are also used in other Monte Carlo studies of UPP [20,23,26]. Our demand calibration strategy follows [26], as described in detail in their appendix (We are grateful to Professor Nathan Miller for sharing his code for this calibration).…”

Section: Monte Carlomentioning

confidence: 99%

Antitrust analysis with upward pricing pressure and cost efficiencies

Dutra¹,

Sabarwal²

2020

PLoS ONE

View full text Add to dashboard Cite

We investigate the accuracy of UPP as a tool in antitrust analysis when there are cost efficiencies from a horizontal merger. We include merger-specific cost efficiencies in a tractable manner in the model and extend the standard UPP formulation to account for these efficiencies. The efficacy of the new UPP formulations is analyzed using Monte Carlo simulation of 40,000 mergers (8 scenarios, 5,000 mergers in each scenario). We find that the new UPP formulations yield substantial gains in prediction of post-merger prices, and there are substantial gains in merger screening accuracy as well. Moreover, the new UPP formulations outperform the standard UPP formulation at higher thresholds for all the standard cases in the paper. The results are robust to several additional analyses. The results show that including cost efficiencies in a manner guided by the theoretical model may yield substantial improvements in accuracy of UPP as a tool in antitrust analysis.

show abstract

Pass‐Through and the Prediction of Merger Price Effects

Cited by 30 publications

References 37 publications

Empirical Properties of Diversion Ratios

Empirical Properties of Diversion Ratios

Demand estimation and merger simulations for drugs: Logits v. AIDS

Antitrust analysis with upward pricing pressure and cost efficiencies

Contact Info

Product

Resources

About