Antitrust & Competition Policy Blog

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

Tuesday, September 1, 2015

cGUPPI: Scoring Incentives to Engage in Parallel Accommodating Conduct

Serge Moresi, Charles River Associates (CRA), David Reitman , Charles River Associates, Inc., Steven C. Salop, Georgetown University Law Center, Yianis Sarafidis, Charles River Associates (CRA) discuss cGUPPI: Scoring Incentives to Engage in Parallel Accommodating Conduct.

ABSTRACT: We propose an index for scoring coordination incentives, which we call the “coordination GUPPI” or cGUPPI. While the cGUPPI can be applied to a wide range of coordinated effects concerns, it is particularly relevant for gauging concerns of parallel accommodating conduct (PAC), a concept that received due prominence in the 2010 U.S. Horizontal Merger Guidelines. PAC is a type of coordinated conduct whereby a firm raises price with the expectation—but without any prior agreement—that one or more other firms will follow and match the price increase. The cGUPPI is the highest uniform price increase that all the would-be coordinating firms would be willing to implement without side payments. A larger cGUPPI implies a more pronounced incentive and ability for firms to engage in coordinated price increases. The difference between the post- and pre-merger cGUPPI (i.e. the Delta cGUPPI) is a practical way to score the effect of a merger on coordinated effects concerns.

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