Antitrust analysis with upward pricing pressure and cost efficiencies

Autoři: Jéssica Dutra aff001;  Tarun Sabarwal aff002
Působiště autorů: Economists Incorporated, Washington, DC, United States of America aff001;  Economics Department, The University of Kansas, Lawrence, KS, United States of America aff002
Vyšlo v časopise: PLoS ONE 15(1)
Kategorie: Research Article


We investigate the accuracy of UPP as a tool in antitrust analysis when there are cost efficiencies from a horizontal merger. We include merger-specific cost efficiencies in a tractable manner in the model and extend the standard UPP formulation to account for these efficiencies. The efficacy of the new UPP formulations is analyzed using Monte Carlo simulation of 40,000 mergers (8 scenarios, 5,000 mergers in each scenario). We find that the new UPP formulations yield substantial gains in prediction of post-merger prices, and there are substantial gains in merger screening accuracy as well. Moreover, the new UPP formulations outperform the standard UPP formulation at higher thresholds for all the standard cases in the paper. The results are robust to several additional analyses. The results show that including cost efficiencies in a manner guided by the theoretical model may yield substantial improvements in accuracy of UPP as a tool in antitrust analysis.

Klíčová slova:

Approximation methods – Data processing – Employment – European Union – Public policy – Research errors – Simulation and modeling – Monte Carlo method


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2020 Číslo 1
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