Merger Simulation in an Administrative Context

Abstract

This article addresses the application of the economic literature on merger simulation to the practical context of antitrust enforcement. It highlights the value of simple simulations as a basis for creating screens and presumptions – particularly the gross upward pricing pressure index for the preliminary review of unilateral effects among sellers of branded consumer products and a presumption based on identifying mavericks for the analysis of coordinated effects – in order to provide guidance to merging firms and judges, who may not have specialized competition policy expertise. The article explains why antitrust agencies should rely on these approaches to identify mergers for in-depth review, and why courts should be encouraged to accept them as the basis for presumptions of anticompetitive effect. The proposed role for simple simulations is consistent with the direction in which the U.S. horizontal merger guidelines are evolving.

Keywords: merger simulation, antitrust review of mergers

JEL Classification: K21, L40