Challenges in Merger Simulation Analysis
Knittel, Christopher R., and
Konstantinos Metaxoglou. 2011. "Challenges in Merger Simulation Analysis."
American Economic Review,
In this paper, we share our experience with merger simulations using a Random Coefficient Logit model on the demand side and assuming a static Bertrand game on the supply side. Drawing largely from our work in Knittel and Metaxoglou (2008), we show that different demand estimates obtained from different combinations of optimization algorithms and starting values lead to substantial differences in post-merger market outcomes using metrics such as industry profits, and change in consumer welfare and prices.
Article Full-Text Access
Knittel, Christopher R. (MIT)
Metaxoglou, Konstantinos (Bates White LLC, Washington, DC)
D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
G34: Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L13: Oligopoly and Other Imperfect Markets
L25: Firm Performance: Size, Diversification, and Scope