Friday, January 7, 2011
Posted by D. Daniel Sokol
Philippe Chone, National Institute of Statistics and Economic Studies (INSEE) and Laurent Linnemer, National Institute of Statistics and Economic Studies (INSEE) - Laboratory of Industrial Economics explain A Treatment Effect Method for Merger Analysis with an Application to Parking Prices in Paris.
ABSTRACT: Most retrospective merger studies resort to the treatment effect approach, comparing the price dynamics in a treatment group and in a control group. We propose a systematic method to construct the groups, which applies to any industry with spatial competition. The method is consistent with the fact that mergers alter oligopolistic equilibria in complex ways, and thus that seemingly distant entities may be affected through indirect channels. An illustration based on a merger in the Parisian parking market is provided.