Download this Paper Open PDF in Browser

Pass-Through Rates and the Price Effects of Mergers

23 Pages Posted: 13 Jul 2001  

Luke Froeb

Vanderbilt University - Strategy and Business Economics

Steven Tschantz

Vanderbilt University - Department of Mathematics

Gregory J. Werden

U.S. Department of Justice - Antitrust Division

Date Written: July 2001

Abstract

We investigate the relationship between the price effects of mergers in Bertrand oligopoly and the rates at which merger synergies are passed through to consumers in the form of lower prices. Our main conclusion is that pass-through rates and price effects are closely related. In particular, when a merger would cause large price increases absent synergies, the pass-through rate is high. This close relationship implies that pass-through and price effects should not be addressed independently in any phase of a merger investigation. We show that in a leading merger case, the low estimated pass-through rate and the relatively large predicted merger effect most likely were inconsistent.

Keywords: Pass-through, merger, efficiencies, Bertrand, antitrust

JEL Classification: C72, L41

Suggested Citation

Froeb, Luke and Tschantz, Steven and Werden, Gregory J., Pass-Through Rates and the Price Effects of Mergers (July 2001). Available at SSRN: https://ssrn.com/abstract=274848 or http://dx.doi.org/10.2139/ssrn.274848

Luke M. Froeb (Contact Author)

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States
615-322-9057 (Phone)
615-343-7177 (Fax)

Steven T. Tschantz

Vanderbilt University - Department of Mathematics ( email )

Nashville, TN 37240
United States

Gregory J. Werden

U.S. Department of Justice - Antitrust Division ( email )

450 Fifth Street, NW
9th Floor
Washington, DC 20530
United States
202-307-6366 (Phone)

Paper statistics

Downloads
488
Rank
46,915
Abstract Views
3,003