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Discussion Paper Details

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Title: Assessment of Post-merger Coordinated Effects: Characterization by Simulations

Author(s): Marc Ivaldi and Vicente Lagos

Publication Date: April 2016

Keyword(s): Collusion, Coordinated effects, Critical Discount Factor and Merger Simulation

Programme Area(s): Industrial Organization

Abstract: This paper aims at evaluating the coordinated effects of horizontal mergers by simulating their impact on firms' critical discount factors. We consider a random coefficient model on the demand side and heterogeneous price-setting firms on the supply side. Results suggest that mergers strengthen the incentives to collude among merging parties, but weaken the incentives of non-merging parties, with the former effect being stronger. To assess the magnitudes of these effects, we introduce the concepts of Asymmetry in Payoffs and Change in Payoffs effects, which allow us to identify appropriate screening tools according to the relative pre-merger payoffs of merging parties.

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Bibliographic Reference

Ivaldi, M and Lagos, V. 2016. 'Assessment of Post-merger Coordinated Effects: Characterization by Simulations '. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11218