Recent Advances in Antitrust: Mergers and Collusive Behavior
Sunday, Jan. 3, 2021 12:15 PM - 2:15 PM (EST)
- Chair: Nancy Rose, Massachusetts Institute of Technology
Merger, Product Repositioning and Firm Entry: the Retail Craft Beer Market in California
AbstractWe study the effects of merger on firm entry, product repositioning and prices in the retail craft beer market in California. To deal with selection on unobserved fixed cost shocks, we develop a new method to estimate multiple-discrete choice models. The method is based on bounds of conditional choice probabilities and does not require solving the game. Using the estimated model, we simulate a counterfactual merger where a large brewery acquires multiple craft breweries. In most markets, we find that new firms enter, non-merging incumbents add products, and merging firms drop products. However, the net effects of product variety from firm entry and product repositioning differ considerably across markets. Larger markets are more likely to see an increase in product variety, which moderates the loss of consumer surplus from the merger's price effects. In a majority of smaller markets, product variety decreases, exacerbating the welfare loss from the price effects.
Concentration Screens for Horizontal Mergers
AbstractIn this paper, we examine concentration-based screens for horizontal mergers, such as those employed in the US DOJ and FTC Horizontal Merger Guidelines. We make two points: First, we show that there is both a theoretical and an empirical basis for focusing solely on the change in the Herﬁndahl index, and ignoring its level, in screening mergers for whether their unilateral eﬀects will harm consumers. Second, we argue, again both theoretically and empirically, that the levels at which the presumptions currently are set may be too lax, especially with regards to safe harbors.
Algorithmic Pricing and Competition: Evidence from the German Retail Gasoline Market
AbstractEconomic theory provides ambiguous and conflicting predictions about the relationship between algorithmic pricing and competition. In this paper we provide the first empirical analysis of this relationship. We study Germany's retail gasoline market where algorithmic-pricing software became widely available by mid-2017, and for which we have access to comprehensive, high-frequency price data. Our analysis involves two steps. First we identify stations that adopt algorithmic-pricing software by testing for structural breaks in markers associated with algorithmic pricing. We find a large number of station-level structural breaks around the suspected time of large-scale adoption. Second, we investigate the impact of adoption on outcomes linked to competition. Since station-level adoption is endogenous, we instrument using brand headquarter-level adoption decisions. Our IV results show that adoption increases margins by 12%, but only in non-monopoly markets. Furthermore, restricting attention to duopoly markets, we find that market-level margins do not change when only one of the two stations adopts, but increase by nearly 30% in markets where both do. These results suggest that AI adoption has a significant effect on competition.
Ohio State University
University of Pennsylvania
- L4 - Antitrust Issues and Policies
- D4 - Market Structure, Pricing, and Design