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Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market DefinitionJoseph FarrellUniversity of California, Berkeley - Department of Economics Carl ShapiroUniversity of California, Berkeley - Haas School of Business February 15, 2010 Abstract: 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.
Number of Pages in PDF File: 35 Keywords: mergers, antitrust, unilateral effects, market definition, relevant market JEL Classification: K21, L13, L4, L40 working papers seriesDate posted: December 10, 2008 ; Last revised: February 22, 2010Suggested CitationContact Information
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