Mergers with Differentiated Products: The Case of Ready-to-Eat Cereal

Aviv Nevo

Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley

Abstract: Traditional merger analysis, based on market definition and use of concentration measures to infer potential anti-competitive effects, is problematic and difficult to implement when evaluating mergers in industries with differentiated products. This paper discusses an alternative which consists of a front-end estimation of demand and back-end use of a model of post-merger conduct to simulate the competitive effects of a merger. I discuss and demonstrate the use of different methods of estimating demand. Furthermore, I show how the estimated demand parameters can be used to compute the post-merger price equilibrium (rather than just an approximation to it) and changes in welfare. The methodology is applied to two recent mergers and two hypothetical mergers in the ready-to-eat cereal industry. The results clearly demonstrate the importance of the model used in front-end estimation and the computation of equilibrium in determining the competitive effects of a merger.

Keywords: Merger analysis; discrete choice models; random coefficients; product differentiation; ready-to-eat cereal industry (search for similar items in EconPapers)
Date: 1997-11-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.escholarship.org/uc/item/1d53t6ts.pdf;origin=repeccitec (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:compol:qt1d53t6ts

Access Statistics for this paper

More papers in Competition Policy Center, Working Paper Series from Competition Policy Center, Institute for Business and Economic Research, UC Berkeley Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().