Antitrust analysis with upward pricing pressure and cost efficiencies
View/ Open
Issue Date
2020-01-08Author
Dutra, Jéssica
Sabarwal, Tarun
Publisher
Public Library of Science
Type
Article
Article Version
Scholarly/refereed, publisher version
Rights
© 2020 Dutra, Sabarwal.
Metadata
Show full item recordAbstract
We investigate the accuracy of UPP as a tool in antitrust analysis when there are cost efficiencies from a horizontal merger. We include merger-specific cost efficiencies in a tractable manner in the model and extend the standard UPP formulation to account for these efficiencies. The efficacy of the new UPP formulations is analyzed using Monte Carlo simulation of 40,000 mergers (8 scenarios, 5,000 mergers in each scenario). We find that the new UPP formulations yield substantial gains in prediction of post-merger prices, and there are substantial gains in merger screening accuracy as well. Moreover, the new UPP formulations outperform the standard UPP formulation at higher thresholds for all the standard cases in the paper. The results are robust to several additional analyses. The results show that including cost efficiencies in a manner guided by the theoretical model may yield substantial improvements in accuracy of UPP as a tool in antitrust analysis.
Description
This work is licensed under a Creative Commons Attribution 4.0 International License.
Collections
Citation
Dutra, J., & Sabarwal, T. (2020). Antitrust analysis with upward pricing pressure and cost efficiencies. PloS one, 15(1), e0227418. https://doi.org/10.1371/journal.pone.0227418
Items in KU ScholarWorks are protected by copyright, with all rights reserved, unless otherwise indicated.
We want to hear from you! Please share your stories about how Open Access to this item benefits YOU.