The Upward Pricing Pressure Test for Merger Analysis PDF Download
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Author: Lydia Cheung
Publisher:
ISBN:
Category : Consolidation and merger of corporations
Languages : en
Pages : 0
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Book Description
Author: Lydia Cheung
Publisher:
ISBN:
Category : Consolidation and merger of corporations
Languages : en
Pages : 0
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Book Description
Author: Nathan H. Miller
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Richard Murgatroyd
Publisher:
ISBN:
Category :
Languages : en
Pages : 15
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Book Description
Arguably the most significant development in horizontal merger assessment in recent years, particularly in the UK and the US, has been the increased use of price pressure tests/indices, which use a relatively limited amount of data from the merging parties and a simple formula to provide an indication of whether a merger is likely to give rise to an increase in prices, i.e. to cause upward pricing pressure. These indices are intended to better capture the extent to which the merging parties are close competitors and hence may be more informative than traditional market share based screens when assessing the prospects for a merger to give rise to unilateral effects in a differentiated products setting.The first part of the paper will review the economics of horizontal mergers and explain the underlying economic intuition upon which pricing pressure indices are based. The paper will then set out the most commonly used of these indices and describe how they may be implemented, elaborating on the empirical inputs and assumptions required, drawing on relevant case law where appropriate. Finally, the paper will comment on the likely future implications of using these indices for merger assessment in South Africa, and the extent to which price pressure indices may be probative regarding the prospects for unilateral effects more generally.
Author: Adriaan Ten Kate
Publisher:
ISBN:
Category :
Languages : en
Pages : 16
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Book Description
Upward pricing pressure has recently become an important analytical tool in horizontal-merger assessment, where it is taken as a measure for the incentives of the merged firm to raise prices. I propose a comprehensive measure for pricing pressure, applicable to any off-equilibrium situation, regardless of whether the departure from equilibrium is due to a merger, a cost change, a change in strategic interaction or just to a suboptimal move away from the equilibrium. For Bertrand competition between single-product firms my measure coincides with the traditional measure for upward pricing pressure. For multiproduct firms it is different from other generalizations to that case.
Author: Dennis W. Carlton
Publisher: Addison Wesley
ISBN:
Category : Business & Economics
Languages : en
Pages : 808
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Book Description
This text offers modern coverage of modern industrial organizations, including strategic behaviour and game theory. It uses a unified structure to analyse theories and empirical evidence about the organization of firms and indutries.
Author: Joseph J. Simons
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Farrell and Shapiro's Upward Pressure on Price (UPP) framework is an innovative and elegant technique designed to evaluate mergers in differentiated product markets. The authors advance their approach primarily as a screen for unilateral effects cases, although others suggest that UPP might be implemented to create a presumption of anticompetitive effect. Whether used as a screen or to establish a presumption, the fundamental workings are the same and the same two issues are present. First, there is no empirical evidence confirming that the method can reliably predict whether a merger is likely to increase price and second, UPP analysis screens or presumes as anticompetitive a very large universe of mergers. We develop simple simulations illustrating that a UPP- based approach would identify mergers as potentially problematic at levels that have not attracted serious scrutiny from any major antitrust authority in decades. Farrell and Shapiro's UPP methodology also has potential as an alternative to merger simulation. Here, we are cautiously optimistic that UPP analysis can replace the complex simulation models introduced by economists over the last 20 years. While the UPP analysis does sacrifice some detail, it offers greater transparency, and thus everyone (economists, lawyers, judges, and even business executives) can easily understand the effects of the parameters on the predictions of the model. However, we advocate caution because UPP simulation analysis, although holding numerous advantages over traditional simulation, has not been shown to reliably predict the price effects of mergers and should not be used in any particular case without such evidence.
Author: Daniel Gore
Publisher: Cambridge University Press
ISBN: 1107007720
Category : Business & Economics
Languages : en
Pages : 559
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Book Description
Provides a clear, concise and practical overview of the key economic techniques and evidence employed in European merger control.
Author: Jessica Dutra
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Book Description
We investigate the accuracy of UPP as a tool in antitrust analysis when there are cost efficiencies from a horizontal merger. We include model-based, merger-specific cost efficiencies in a tractable manner and extend the standard UPP formulation to account for these efficiencies. The efficacy of the new UPP formulations is analyzed using Monte Carlo simulation of 40,000 mergers (8 scenarios, 5,000 mergers in each scenario). We find that the new UPP formulations yield substantial gains in prediction of post-merger prices, as compared to existing practice, and there are substantial gains in merger screening accuracy as well. Moreover, the new UPP formulations outperform the standard UPP formulation at higher thresholds for all the standard cases in the paper. The results support the inclusion of model-based cost efficiencies in the standard UPP formulation for more accurate antitrust decision-making.
Author: Gregor Langus
Publisher:
ISBN:
Category :
Languages : en
Pages : 8
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Book Description
We modify the UPP test of Farrell and Shapiro (2010) to take into account the possibility that a merger weakens (or eliminates) a vertical supply relationship. After deriving a general effect of the merger, we provide an example of simple estimation strategy when only prices, costs and market shares are available as a snapshot.
Author: Christopher T. Conlon
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 0
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Book Description
The 2010 Department of Justice and Federal Trade Commission Horizontal Merger Guidelines lay out a new standard for assessing proposed mergers in markets with differentiated products. This new standard is based on a measure of ``upward pricing pressure,'' (UPP) and the calculation of a ``gross upward pricing pressure index'' (GUPPI) in turn relies on a ``diversion ratio,'' which measures the fraction of consumers of one product that switch to another product when the price of the first product increases. One way to calculate a diversion ratio is to estimate own- and cross-price elasticities. An alternative (and more direct) way to gain insight into diversion is to exogenously remove a product from the market and observe the set of products to which consumers actually switch. In the past, economists have rarely had the ability to experiment in this way, but more recently, the growth of digital and online markets, combined with enhanced IT, has improved our ability to conduct such experiments. In this paper, we analyze the snack food market, in which mergers and acquisitions have been especially active in recent years. We exogenously remove six top-selling products (either singly or in pairs) from vending machines and analyze subsequent changes in consumers' purchasing patterns, firm profits, diversion ratios, and upward pricing pressure. Using both nonparametric analyses and structural demand estimation, we find significant diversion to remaining products. Both diversion and the implied upward pricing pressure differ significantly across manufacturers, and we identify cases in which the GUPPI would imply increased regulatory scrutiny of a proposed merger.
