Generating evidence to guide merger enforcement

Competition Policy International

Volumn 5, Issue 1, 2009, Pages 57-75

  Hosken, Daniel ^a   Ashenfelte, Orley ^a   Weinberg, Matthew ^a  

^a NONE

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EID: 70349212092     PISSN: 15540189     EISSN: 15546853     Source Type: Journal    
DOI: None     Document Type: Article

References (52)

1. Dennis Carlton, The Need to Measure the Effect of Merger Policy and How to Do It, 5(1) COMPETITION POL'Y INT'L (2009).
2. Orley C. Ashenfelter & Daniel S. Hosken, The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies, NBER Working Paper (2008) (W13859).
3. HSR filing and second request figures are taken from the Hart-Scott-Rodino Annual Reports to Congress. The drop in the number of filings and second requests after 2001 is due both to the end of a merger wave and also an increase in the HSR filing threshold from transactions valued at $15 million or more to $59.8 million or more.
4. 3-digit NAICS codes for the merging parties are reported in HSR Premerger Notification and Report Forms.
5. Paul Pautler, Evidence on Mergers and Acquisitions, 48(1) ANTITRUST BULL. 119 (2003).
6. Graeme Hunter, Gregory K. Leonard, & Steven Olley, Merger Retrospective Studies: A Review, 23 ANTITRUST 34-41 (2008).
7. Matthew C.Weinberg, The Price Effects of Horizontal Mergers, 4(2) J. COMPETITION L. & ECON. 433-47 (July 2008).
8. Ashenfelter, supra note 2.
9. All prices are taken from the Energy Information administration's website, http://www.eia.doe.gov/.
10. Prices of West Texas Crude, the most commonly traded crude in the United States.
11. Hayley Chouinard & Jeffrey M. Perloff, Gasoline Price Differences: Taxes, Pollution Regulations, Mergers, Market Power, and Market Conditions, B.E. J. ECON. ANALYSIS & POL'Y (2009).
12. Prices increased in Chicago and throughout the Midwest by nearly 60 cents a gallon in a little over a month, while more distant regions (connected by pipeline) experienced much smaller changes in price. See Jeremy I. Bulow, Jeffrey H. Fischer, Jay S. Creswell Jr., & Christopher T. Taylor, U.S. Midwest Gasoline Pricing and the Spring 2000 Price Spike, 24 (3) ENERGY J. 121-194 (2003). Despite facing identical input (crude oil) costs, supply shocks in gasoline markets can lead to large changes in relative prices that can take weeks to dissipate.
13. The price effects of a number of localized supply shocks are shown in Chapter 4 of United States Federal Trade Commission FTC, Gasoline Price Changes: The Dynamic of Supply, Demand, and Competition, Technical Report, United States Federal Trade Commission (2005).
14. This example has been presented in terms of a single merging firm product and a single treatment product to provide easy intuition. In most applications, researchers estimate the price effects for multiple products using multiple controls.
15. E. Han Kim & Vijay Singal, Mergers and Market Power: Evidence from the U.S. Airline Industry, (83) AMER. ECON. REV. 549-569 (1993).
16. Ashenfelter, supra note 2.
17. Raymond Deneckere & Carl Davidson, Incentives to Form Coalitions with Bertrand Competition, 16 RAND 473-86 (1985).
18. The result that rivals firms' prices increase from the pre-merger equilibrium to the post-merger equilibrium in Bertrand models with product differentiation depends upon properties of the demand curve and the shape of the marginal cost curve. If marginal costs are constant or increasing, a sufficient condition is that the cross derivative of demand is small.
19. Justine S. Hastings & Richard J. Gilbert, Market Power, Vertical Integration, and the Wholesale Price of Gasoline, 53(4) J. INDUS. ECON. 469-492 (December 2005).
20. GAO, Effects of Mergers and Market Concentration in the U.S. Petroleum Industry, Report to the Ranking Minority Member, Permanent Subcommittee on Investigations, Committee on Governmental Affairs, U.S. Senate, United States General Accounting Office (May 2004).
21. John Simpson & Christopher T. Taylor, Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction, 51(1) J. L. & ECON.135-52 (2008).
22. Justine S. Hastings, Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California, 94(1) AMER. ECON. REV. 317-328 (March 2004).
23. Chouinard, supra note 11.
24. Christopher T. Taylor & Daniel S. Hosken, The Economic Effects of the Marathon-Ashland Joint Venture: The Importance of Industry Supply Shocks and Vertical Market Structure, 55(3) J. INDUS. ECON 419-451 (2007).
25. These wholesale prices are referred to as rack prices in the industry because they are the prices charged at the truck rack where the gasoline is pumped into a delivery truck.
26. This is often called a dealer-tank-wagon ("DTW") price because the price of gasoline typically includes a delivery charge. Some independently owned stations enter into long term supply agreements with a refiner and pay a DTW price for gasoline. 27 Bulow, supra, note 12, at 121-149.
27. Taylor, supra note 24.
28. Id. at 7-8.
29. Taylor and Hosken note that DTW prices fell relative to observed rack prices, suggesting that not all retailers felt a wholesale price increase.
30. This issue is addressed at length in three recent hospital merger retrospectives: Debra Haas-Wilson & Christopher Garmon, Two Hospital Mergers on Chicago's North Shore: A Retrospective Study, Bureau of Economics Working Paper, Federal Trade Commission (2009);
31. Steven Tenn, The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction, Bureau of Economics Working Paper, Federal Trade Commission (2008);
32. and Aileen Thompson, The Effects of Hospital Mergers on Inpatient Prices: A Case Study of the New Hanover Cape Fear Transaction, Bureau of Economics Working Paper, Federal Trade Commission 2009.
33. Robin A. Prager &Timothy H. Hannan, Do Substantial Horizontal Mergers Generate Significant Price E ects? Evidence from the Banking Industry, 46(4) J. IND. ECON. 433-52 (1998).
34. Kim, supra note 15.
35. Tenn, supra note 31.
36. Donald W.K. Andrews & Werner Ploberger, Optimal Tests When a Nuisance Parameter is Present Only Under the Alternative, 62(6) ECONOMETRICA 1383-1414 (1994).
37. Jushan Bai & Pierre Perron, Estimating and Testing Linear Models with Multiple Structural Changes, 66(8) ECONOMETRICA 47-78 (1996).
38. Ashenfelter, supra note 2.
39. Carlton, supra note 1.
40. Ashenfelter, supra note 2.
41. Jonathan B. Baker & Timothy F. Bresnahan, The Gains from Merger or Collusion in Product-differentiated Industries, 33(4) J. INDUS. ECON. 427-44 (1985).
42. Jerry A. Hausman, Gregory K. Leonard, & J. Douglas Zona, Competitive Analysis with Differentiated Products, 34(1) ANNALES D'ECONOMIE ET DE STATISTIQUE, 159-180 (1994).
43. Gregory J.Werden & Luke M. Froeb, The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy, 10(2) J.L. ECON. & ORG., 407-26 (1994).
44. Aviv Nevo, Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry, 31(3) RAND 395-421 (2000).
45. Craig Peters, Evaluating the Performance of Merger Simulations: Evidence from the U.S. Airline Industry, 49 J. L. & ECON. 627-649 (2006).
46. Matthew C.Weinberg & Daniel Hosken, Using Mergers to Test a Model of Oligopoly,Working Paper, University of Georgia (2008).
47. B. Espen Eckbo, Horizontal Mergers, Collusion and Stockholder Wealth, 11 J. FIN. ECON. 241-273 (1983).
48. R. Stillman, Examining Antitrust Policy Towards Horizontal Mergers, 11 J. FIN. ECON. 225-240 (1983).
49. R. P. McAfee & M.A.Williams, Can Event Studies Detect Anticompetitive Mergers?, 28 ECON LETTERS 199-203 (1988).
50. David. M. Barton & Roger Sherman, The Price and Profit Effects of Horizontal Mergers: A Case Study, 38(2) J. INDUS. ECON 165-177 (1984).
51. Orley C. Ashenfelter, David Ashmore, Jonathan Baker, Suzanne Gleason, & Daniel S. Hosken, Empirical Methods in Merger Analysis: Econometric Analysis of Pricing in FTC v. Staples, INT'L J. ECON. BUS. (2006).
52. In Mark D. Manuszak & Charles C. Moul, Prices and Endogenous Market Structure in Office Supply Superstores, 56 J. INDUS. ECON. (2008), the authors also estimate a reduced form pricing equation for Staples which allows for the endogeniety of market structure and find qualitatively similar results to Ashenfelter, et al.