Friday, May 7, 2010
Posted by D. Daniel Sokol
Peter J. Davis (Competition Commission UK) and Cristian Huse (Stockholm School of Economics) have an interesting paper on Estimating the ‘Coordinated Effects’ of Mergers.
ABSTRACT: Mergers can be blocked if they increase the likelihood of coordination. This paper presents the first empirical coordinated effects merger simulation model in a differentiated product market. We study the network server market. We find that the incentives to coordinate actually fell as a result of the merger between HP and Compaq and show, contrary to conventional economic logic, that incentives to coordinate will ceteris paribus often fall in this way after a merger. We extend the model to empirically examine the impact of multi-market contact, a competitive fringe, and the presence of an antitrust authority imposing punishments on tacit colluders in the form of fines.