A Note on Upward Pricing Pressure: The Possibility of False Positives
13 Pages Posted: 1 Jun 2012
Date Written: May 8, 2012
Farrell and Shapiro proposed a simple test of the possible upward pricing pressure (UPP) following a merger. They showed that the test may give false negatives, that is, indicate that a merger may not give an UPP, while a more comprehensive test would indicate the opposite. We show that their test applied to a case with asymmetric firms may give false positives.
Keywords: Unilateral merger effects, post-merger price effects
JEL Classification: K21, L41
Suggested Citation: Suggested Citation