Equilibrium Price Dispersion, Mergers and Synergies: An Experimental Investigation of Differentiated Product Competition

Douglas Davis and Bart Wilson

International Journal of the Economics of Business, 2006, vol. 13, issue 2, 169-194

Abstract: This paper reports an experiment conducted to examine market performance and mergers in an asymmetric differentiated product oligopoly. We find that static Nash predictions organize mean market outcomes reasonably well. Markets on average respond to horizontal mergers with price increases as predicted and marginal cost synergies exert the predicted the power-mitigating price effects. Nash predictions, however, organize outcomes for specific markets and for the different firm-types less precisely. The variability of individual markets and firm-level decisions undermine the predictive capacity of merger simulations conducted with the Antitrust Logit Model, a merger device used by US antitrust authorities to help identify problematic mergers.

Keywords: Differentiated products; Antitrust analysis; Synergies; Experimental economics (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (9)

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DOI: 10.1080/13571510600783922

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