Unilateral effects of mergers with price regulation and quality competition

Baptiste Souillard

Economics Letters, 2024, vol. 242, issue C

Abstract: Merger screening tools are increasingly used in the review of horizontal mergers. They offer insights into the firms’ incentives to increase prices post-transaction. This paper proposes a new indicator, the Quality Reduction Incentive (QRI) index, that can be applied when competition is based on quality rather than prices, as in some healthcare and higher education markets. It represents the minimum percentage reduction in marginal costs necessary to eliminate the merging firms’ incentives to lower quality. Therefore, it can be directly compared to the cost efficiency gains claimed by the parties. Two versions of the QRI index are provided. The first one ignores the feedback effects between the parties, while the second one, more comprehensive, incorporates these interactions. The paper then explains how antitrust authorities can apply this tool with relatively little data.

Keywords: Unilateral effects; Mergers; Antitrust; Competition; Non-price effects; Quality (search for similar items in EconPapers)
JEL-codes: L10 L41 L44 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:242:y:2024:i:c:s0165176524003690

DOI: 10.1016/j.econlet.2024.111885

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