Using information local to the premerger equilibrium, we derive
approximations of the expected changes in prices and welfare generated
by a merger. We extend the pricing pressure approach of recent
work to allow for non-Bertrand conduct, adjusting the diversion
ratio and incorporating the change in anticipated accommodation.
To convert pricing pressures into quantitative estimates of price
changes, we multiply them by the merger pass-through matrix, which
(under conditions we specify) is approximated by the premerger rate
at which cost increases are passed through to prices. Weighting the
price changes by quantities gives the change in consumer surplus.
"The First-Order Approach to Merger Analysis."
American Economic Journal: Microeconomics,
Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
Production, Pricing, and Market Structure; Size Distribution of Firms
Oligopoly and Other Imperfect Markets