Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, February 5, 2010

Demand Side Merger Efficiencies

Posted by D. Daniel Sokol

David Reitman, Charles River Associates, and Dipan Ghosh, Charles River Associates have posted Demand Side Merger Efficiencies.

ABSTRACT: Mergers can generate demand side efficiencies that benefit customers in a number of ways, including procurement savings, transaction efficiencies, and quality improvements. We show that per-unit demand side efficiencies and marginal cost efficiencies of the same magnitude have an equivalent impact on the post-merger market in terms of output and welfare. Consequently, there is no reason to distinguish between marginal cost savings and demand side per-unit efficiencies when evaluating the impact of a merger. We demonstrate how various techniques for evaluating the impact of mergers – compensating marginal cost reductions, upward pricing pressure, and merger simulation – can be readily adapted to incorporate demand side as well as supply side efficiencies.

| Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Demand Side Merger Efficiencies:


Post a comment