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Counting Rivals or Measuring Share: Modeling Unilateral Effects for Merger Analysis

52 Pages Posted: 12 Dec 2010 Last revised: 12 May 2011

Malcolm B. Coate

U.S. Federal Trade Commission (FTC)

Date Written: May 10, 2011


This paper explores the Federal Trade Commission’s unilateral effects merger policy using a sample of 184 investigations undertaken between 1993 and mid-2010. A review of the files suggests that roughly half of the sample is evaluated with a dominant firm/monopoly model, while the rest of the cases require a more complex unilateral effects analysis. Deterministic modeling based on the number of significant rivals suggests that the four-to-three transaction in a market with impediments to entry represents the marginal merger challenge. Case specific facts explain deviations from this rule and suggest that critical diversion ratios fall into the 25-30 percent range. Share based indices (post-merger market share, change in the Herfindahl, or a share-based Gross Upward Pressure on Price variable) can be used, but require the definition of a market and do not predict outcomes as well as the significant rivals’ model. An Appendix details the various reasons why the staff declined to apply a unilateral effects analysis to conclude a merger was likely to substantially lessen competition in a broader sample of differentiated products mergers.

Keywords: Unilateral Effects, Mergers, Federal Trade Commission, Competitive Analysis

JEL Classification: k21, l40

Suggested Citation

Coate, Malcolm B., Counting Rivals or Measuring Share: Modeling Unilateral Effects for Merger Analysis (May 10, 2011). Available at SSRN: or

Malcolm B. Coate (Contact Author)

U.S. Federal Trade Commission (FTC) ( email )

601 Pennsylvania Avenue, NW
Washington, DC 20580
United States

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