The Effects of Merger Efficiencies on Consumers of Differentiated Products

European Competition Journal, Vol. 1, No. 2, October 2005

25 Pages Posted: 22 Oct 2006

See all articles by Gregory J. Werden

Gregory J. Werden

Independent

Luke M. Froeb

Vanderbilt University - Owen Graduate School of Management

Steven Tschantz

Vanderbilt University - Department of Mathematics

Abstract

In differentiated products industries, the extent of the pass through of merger-specific marginal-cost reductions is determined largely by the curvature of demand and idiosyncratic properties of particular functional forms for demand. Thus, addressing pass through as a separate and distinct component of merger analysis is likely to be unproductive. An alternative approach is to determine whether merger-specific marginal-cost reductions are sufficient to offset entirely the price-increasing effects of a merger. In addition, pass-through rates are closely linked to the price-increasing effects of mergers; demand properties that lead to large price increases from mergers absent cost reductions also lead to high pass-through rates. This implies the existence of simple and practical consistency checks on price increase and pass-through predictions.

Keywords: mergers, efficiencies, pass through

JEL Classification: L41, L13, D43

Suggested Citation

Werden, Gregory J. and Froeb, Luke M. and Tschantz, Steven T., The Effects of Merger Efficiencies on Consumers of Differentiated Products. European Competition Journal, Vol. 1, No. 2, October 2005, Available at SSRN: https://ssrn.com/abstract=939056

Luke M. Froeb

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
265
Abstract Views
1,550
rank
127,764
PlumX Metrics