An Econometric-Driven Merger Simulation: Considerations and Application

Abstract

In this paper, we offer a hybrid approach to merger simulation in which we allow rather extensive pre-testing to suggest the "correct", or most desirable, form for the underlying demand curves. Our application is the merger between the large mobile telephone companies Cingular and AT&T Wireless merger in 2004. While a somewhat novel approach, our findings are not radical in any way, so the econometric determination of demand forms does not appear to produce novel conclusion per se. That said, allowing the data to inform the researcher about the appropriate form of demand seems a worthwhile effort for merger simulations, data permitting.

Keywords: Merger Simulation, Demand Models, Telecommunications

JEL Classification: D40, L10, L66