35 Pages Posted: 10 Dec 2008 Last revised: 22 Feb 2010
Date Written: February 15, 2010
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.
Keywords: mergers, antitrust, unilateral effects, market definition, relevant market
JEL Classification: K21, L13, L4, L40
Suggested Citation: Suggested Citation
Farrell, Joseph and Shapiro, Carl, Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition (February 15, 2010). Available at SSRN: https://ssrn.com/abstract=1313782 or http://dx.doi.org/10.2139/ssrn.1313782