« Private Agreements for Coordinating Patent Rights: The Case of Patent Pools | Main | Call for Papers: Advances in the Analysis of Competition Policy and Regulation - 24th of June to the 8th of July, 2011 (Conference: 1-3 July), in the seaside resort of Ixia in Rhodes, Greece »
December 27, 2010
Horizontal Mergers of Online Firms: Structural Estimation and Competitive Effects
Posted by D. Daniel Sokol
Yonghong An (Johns Hopkins University), Michael R Baye (Department of Business Economics and Public Policy, Indiana University Kelley School of Business), Yingyao Hu (Johns Hopkins University), and John Morgan (University of California - Berkeley) analyze Horizontal Mergers of Online Firms: Structural Estimation and Competitive Effects.
ABSTRACT: This paper (1) presents a general model of online price competition, (2) shows how to structurally estimate the underlying parameters of the model when the number of competing firms is unknown or in dispute, (3) estimates these parameters based on UK data for personal digital assistants, and (4) uses these estimates to simulate the competitive effects of horizontal mergers. Our results suggest that competitive effects in this online market are more closely aligned with the simple homogeneous product Bertrand model than might be expected given the observed price dispersion and number of firms. Our estimates indicate that so long as two firms remain in the market post merger, the average transaction price is roughly unaffected by horizontal mergers. However, there are potential distributional effects; our estimates indicate that a three-to-two merger raises the average transaction price paid by price sensitive "shoppers" by 2.88 percent, while lowering the average transaction price paid by consumers "loyal" to a particular firm by 1.37 percent.
December 27, 2010 | Permalink
TrackBack URL for this entry:
Listed below are links to weblogs that reference Horizontal Mergers of Online Firms: Structural Estimation and Competitive Effects: