Abstract

http://ssrn.com/abstract=2153459
 


 



Does Merger Simulation Work? A 'Natural Experiment' in the Swedish Analgesics Market


Jonas Björnerstedt


affiliation not provided to SSRN

Frank Verboven


KU Leuven - Faculty of Business and Economics (FBE)

July 2012

CEPR Discussion Paper No. DP9027

Abstract:     
We exploit a natural experiment associated with a large merger in the Swedish market for analgesics (painkillers). We confront the predictions from a merger simulation study, as conducted during the investigation, with the actual merger effects over a two-year comparison window. The merger simulation model is based on a constant expenditures specification for the nested logit model (as an alternative to the typical unit demand specification). The model predicts a large price increase of 34% by the merging firms, because there is strong market segmentation and the merging firms are the only competitors in the largest segment. The actual price increase after the merger is of a similar order of magnitude: +42% in absolute terms and +35% relative to the

Number of Pages in PDF File: 39

Keywords: analgesics, constant expenditures nested logit, ex post merger analysis, merger simulation

JEL Classification: L40, L41

working papers series


Date posted: September 28, 2012  

Suggested Citation

Björnerstedt, Jonas and Verboven, Frank, Does Merger Simulation Work? A 'Natural Experiment' in the Swedish Analgesics Market (July 2012). CEPR Discussion Paper No. DP9027. Available at SSRN: http://ssrn.com/abstract=2153459

Contact Information

Jonas Björnerstedt (Contact Author)
affiliation not provided to SSRN ( email )
No Address Available
Frank Verboven
KU Leuven - Faculty of Business and Economics (FBE) ( email )
Naamsestraat 69
Leuven, B-3000
Belgium
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