Merger Simulation: A Simplified Approach with New Applications
Roy J. Epstein
Daniel L. Rubinfeld
University of California at Berkeley - School of Law; NYU Law School; National Bureau of Economic Research (NBER)
Antitrust Law Journal, December 2001
Merger simulation is growing in importance as a tool to evaluate the unilateral competitive effects of mergers. This paper offers a relatively non-technical description of the principles of merger simulation. In addition, it introduces PCAIDS, a new and highly flexible "calibrated-demand" merger simulation methodology that is based on a simplified version of AIDS. PCAIDS can be implemented on a conventional spreadsheet using market shares and two price elasticities; scanner or transaction-level data are not required. The paper offers some applications of merger simulation with PCAIDS that include comparisons with other simulation models. It also shows how PCAIDS can be applied to the analysis of efficiencies, divestiture, and product repositioning/entry. Finally, the paper offers an analysis of the Merger Guidelines safeharbors. A detailed mathematical appendix is included.
Keywords: Antitrust, merger simulation, unilateral effects, empirical methods
JEL Classification: L40Accepted Paper Series
Date posted: November 28, 2001
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