Merger Analysis with IIA Demand
Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with a demand system that satisfies the Independence of Irrelevant Alternatives (IIA) property. We show that the Herfindahl index provides an adequate measure of the oligopoly distortions to consumer surplus and aggregate surplus, and that the induced change in the naively computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.
Date: 10 February 2023, 14:15 (Friday, 4th week, Hilary 2023)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room G or https://zoom.us/j/93867615769?pwd=VmRJVVRkYlhUajllTEJyd2NsTUs3QT09
Speaker: Nicolas Schutz (University of Mannheim)
Organising department: Department of Economics
Part of: Nuffield Economic Theory Seminar
Booking required?: Not required
Audience: Public
Editor: Emma Heritage