Mergers with Differentiated Products: The Case of Ready-to-Eat Cereal

Aviv Nevo

Finance from University Library of Munich, Germany

Abstract: Traditional merger analysis, based on market definition and use of concentration measures to infer potential anti-competitive effects, is problematic and difficult to implement when evaluating mergers in industries with differentiated products. This paper discusses an alternative which consists of a front-end estimation of demand and back-end use of a model of post-merger conduct to simulate the competitive effects of a merger. I discuss and demonstrate the use of different methods of estimating demand. Furthermore, I show how the estimated demand parameters can be used to compute the post-merger price equilibrium (rather than just an approximation to it) and changes in welfare. The methodology is applied to two recent mergers and two hypothetical mergers in the ready-to-eat cereal industry. The results clearly demonstrate the importance of the model used in front-end estimation and the computation of equilibrium in determining the competitive effects of a merger.

JEL-codes: D4 G34 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2003-03-27
New Economics Papers: this item is included in nep-cfn, nep-com and nep-ind
Note: 59 pages, Adobe.pdf
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https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0303/0303004.pdf (application/pdf)

Related works:
Working Paper: Mergers with Differentiated Products: The Case of Ready-to-Eat Cereal (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0303004

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