Thursday, May 1, 2008
Posted by D. Daniel Sokol
Tarcisio da Graca of the Brazilian Federal Senate writes about Horizontal Merger Simulation: A Complementary Tool to the Structural Analysis.
ABSTRACT: The authorities of the Brazilian competition system decide upon horizontal mergers and acquisitions that come to their review, applying the traditional structural analysis, as established by the Brazilian horizontal merger guidelines. This article aims at illustrating the refinement that can be achieved in the evaluation process of such cases, by using differentiated product horizontal merger simulation models. Applying both methodologies to hypothetical cases, I illustrate that the simulation results provide more precise information about their likely effects with richer details. This may be accomplished by using the same data required for the structural analysis. The use of the simulation model may also contribute to guide the discussion about the impact of the efficiencies generated by a merger and about the role of potential or real entries of new firms in the market place.