Concentration-Based Inference for Evaluating Horizontal Mergers

Paul S. Koh
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Paul S. Koh: Yonsei University

No 2025rwp-266, Working papers from Yonsei University, Yonsei Economics Research Institute

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.

Keywords: Merger; Herfindahl-Hirschman index; consumer surplus; upward pricing pressure (search for similar items in EconPapers)
JEL-codes: D43 L13 L41 L44 (search for similar items in EconPapers)
Pages: 36pages
Date: 2025-09
New Economics Papers: this item is included in nep-com and nep-reg
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