Abstract

http://ssrn.com/abstract=274848
 
 

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Pass-Through Rates and the Price Effects of Mergers


Luke Froeb


Vanderbilt University - Strategy and Business Economics

Steven Tschantz


Vanderbilt University - Department of Mathematics

Gregory J. Werden


U.S. Department of Justice - Antitrust Division

July 2001


Abstract:     
We investigate the relationship between the price effects of mergers in Bertrand oligopoly and the rates at which merger synergies are passed through to consumers in the form of lower prices. Our main conclusion is that pass-through rates and price effects are closely related. In particular, when a merger would cause large price increases absent synergies, the pass-through rate is high. This close relationship implies that pass-through and price effects should not be addressed independently in any phase of a merger investigation. We show that in a leading merger case, the low estimated pass-through rate and the relatively large predicted merger effect most likely were inconsistent.

Number of Pages in PDF File: 23

Keywords: Pass-through, merger, efficiencies, Bertrand, antitrust

JEL Classification: C72, L41

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Date posted: July 13, 2001  

Suggested Citation

Froeb, Luke and Tschantz, Steven and Werden, Gregory J., Pass-Through Rates and the Price Effects of Mergers (July 2001). Available at SSRN: http://ssrn.com/abstract=274848 or http://dx.doi.org/10.2139/ssrn.274848

Contact Information

Luke M. Froeb (Contact Author)
Vanderbilt University - Strategy and Business Economics ( email )
Nashville, TN 37203
United States
615-322-9057 (Phone)
615-343-7177 (Fax)

Steven T. Tschantz
Vanderbilt University - Department of Mathematics ( email )
Nashville, TN 37240
United States
Gregory J. Werden
U.S. Department of Justice - Antitrust Division ( email )
450 Fifth Street, NW
9th Floor
Washington, DC 20530
United States
202-307-6366 (Phone)
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