The First-Order Approach to Merger Analysis

Sonia Jaffe and E. Glen Weyl

American Economic Journal: Microeconomics, 2013, vol. 5, issue 4, 188-218

Abstract: Using information local to the premerger equilibrium, we derive approximations of the expected changes in prices and welfare generated by a merger. We extend the pricing pressure approach of recent work to allow for non-Bertrand conduct, adjusting the diversion ratio and incorporating the change in anticipated accommodation. To convert pricing pressures into quantitative estimates of price changes, we multiply them by the merger pass-through matrix, which (under conditions we specify) is approximated by the premerger rate at which cost increases are passed through to prices. Weighting the price changes by quantities gives the change in consumer surplus.

JEL-codes: D43 G34 L11 L13 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/mic.5.4.188
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (82)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mic.5.4.188 (application/pdf)
http://www.aeaweb.org/aej/mic/app/2012-0166_app.pdf (application/pdf)
http://www.aeaweb.org/aej/mic/ds/november2013/2012-0166_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

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:aea:aejmic:v:5:y:2013:i:4:p:188-218

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Microeconomics is currently edited by Johannes Hörner

More articles in American Economic Journal: Microeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().