Concentration-Based Inference for Evaluating Horizontal Mergers

Paul S. Koh

Papers from arXiv.org

Abstract: Antitrust authorities routinely rely on market concentration measures to assess the potential adverse effects of mergers on consumer welfare. Using a first-order approximation argument with logit and CES demand, I derive the relationship between the welfare effect of a merger on consumer surplus and the change in the Herfindahl-Hirschman Index (HHI). My results suggest that merger harm is correlated with the merger-induced change in HHI, and the proportionality coefficient depends on the price responsiveness parameter, market size, and the distribution of market shares within and across the merging firms. I present numerical validation of my formula along with an empirical illustration.

Date: 2024-07, Revised 2025-09
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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