Merger Simulation: A Simplified Approach with New Applications

Posted: 28 Nov 2001

See all articles by Roy J. Epstein

Roy J. Epstein

Independent

Daniel L. Rubinfeld

University of California at Berkeley - School of Law; National Bureau of Economic Research (NBER); NYU Law School

Abstract

Merger simulation is growing in importance as a tool to evaluate the unilateral competitive effects of mergers. This paper offers a relatively non-technical description of the principles of merger simulation. In addition, it introduces PCAIDS, a new and highly flexible "calibrated-demand" merger simulation methodology that is based on a simplified version of AIDS. PCAIDS can be implemented on a conventional spreadsheet using market shares and two price elasticities; scanner or transaction-level data are not required. The paper offers some applications of merger simulation with PCAIDS that include comparisons with other simulation models. It also shows how PCAIDS can be applied to the analysis of efficiencies, divestiture, and product repositioning/entry. Finally, the paper offers an analysis of the Merger Guidelines safeharbors. A detailed mathematical appendix is included.

Keywords: Antitrust, merger simulation, unilateral effects, empirical methods

JEL Classification: L40

Suggested Citation

Epstein, Roy J. and Rubinfeld, Daniel L., Merger Simulation: A Simplified Approach with New Applications. Available at SSRN: https://ssrn.com/abstract=291222

Roy J. Epstein

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Daniel L. Rubinfeld (Contact Author)

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