Divestiture requirements as a tool for competition policy: A case from the Swedish beer market

Richard Friberg and Andre Romahn

International Journal of Industrial Organization, 2015, vol. 42, issue C, 1-18

Abstract: We investigate the effect of divestitures on prices and welfare following the Carlsberg–Pripps merger in the Swedish beer market. Both difference-in-difference estimation and simulations using a random coefficients logit model suggest that divestitures are important for dampening price increases. Prices of divested brands fall by around 3% and the predicted price increase for Carlsberg falls from 3 to 1.6% as a result of the divestitures. To guide practice on divestitures, we investigate the role of the recipient and the number and characteristics of the divested products by simulating post-merger outcomes for all relevant cases. We find that in this setting with large multiproduct firms, the competition authority's most effective means to dampen adverse post-merger outcomes are to aim for a small recipient firm and attain a large number of divested products. Enforcing larger divestitures in terms of market share and raising the average cross-price elasticity between the merging parties' divested and retained products strengthen the dampening effect further.

Keywords: Divestitures; Merger simulation; Ex-post merger review (search for similar items in EconPapers)
JEL-codes: K21 L11 L41 L66 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:42:y:2015:i:c:p:1-18

DOI: 10.1016/j.ijindorg.2015.06.005

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