Does Merger Simulation Work? A "Natural Experiment" in the Swedish Analgesics Market Market
Jonas Björnerstedt and
No 9027, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We exploit a natural experiment associated with a large merger in the Swedish market for analgesics (painkillers). We confront the predictions from a merger simulation study, as conducted during the investigation, with the actual merger effects over a two-year comparison window. The merger simulation model is based on a constant expenditures specification for the nested logit model (as an alternative to the typical unit demand specification). The model predicts a large price increase of 34% by the merging firms, because there is strong market segmentation and the merging firms are the only competitors in the largest segment. The actual price increase after the merger is of a similar order of magnitude: +42% in absolute terms and +35% relative to the
Keywords: analgesics; constant expenditures nested logit; ex post merger analysis; merger simulation (search for similar items in EconPapers)
JEL-codes: L40 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-com and nep-ind
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