Recapture Ratios in Merger Analysis
20 Pages Posted: 31 Oct 2017
Date Written: October 29, 2017
Most quantitative tools for assessing potential competitive effects of mergers (e.g., upward pricing pressure indices and merger simulation models) rely heavily on recapture ratios. We show how recapture ratios can be approximated using simple microeconomic relationships and commonly-used parameters — namely, the products’ sales, profit margins, and group elasticity of demand. We illustrate our approach for both horizontal and vertical product differentiation.
Keywords: Recapture Ratios, Aggregate Diversion Ratios, Competitive Effects of Mergers
JEL Classification: L4
Suggested Citation: Suggested Citation