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Analyzing Horizontal Mergers: Unilateral Effects in Product-Differentiated Markets

34 Pages Posted: 28 Mar 2009  

Herbert J. Hovenkamp

University of Pennsylvania Law School; University of Pennsylvania - The Wharton School; University College London

Date Written: March 13, 2009

Abstract

This essay offers a brief, non-technical exposition of the antitrust analysis of horizontal mergers in product differentiated markets where the resulting price increase is thought to be unilateral - that is, only the post-merger firm increases its prices while other firms in the market do not. More realistically, non-merging firms who are reasonably close in product space to the merging firm will also be able to increase their prices when the post-merger firm's prices rise. The unilateral effects theory is robust and has become quite conventional in merger analysis. There is certainly no reason for thinking that it involves any more conjecture than what occurs in traditional concentration-increasing merger analysis. Nevertheless, as with all predictions about mergers, we must live with a certain measure of uncertainty.

Keywords: Antitrust, Monopoly, Mergers, Competition

JEL Classification: K00, K2, K21, L4, L41

Suggested Citation

Hovenkamp, Herbert J., Analyzing Horizontal Mergers: Unilateral Effects in Product-Differentiated Markets (March 13, 2009). U Iowa Legal Studies Research Paper No. 09-12. Available at SSRN: https://ssrn.com/abstract=1359288 or http://dx.doi.org/10.2139/ssrn.1359288

Herbert Hovenkamp (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
319-512-9579 (Phone)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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