Abstract and Keywords
This chapter explains the logic underlying unilateral effects analysis of horizontal mergers. It presents an analytical framework for assessing the direction of unilateral price effects in the context of differentiated products markets. It extends this framework to account for cost efficiencies, changes in product quality, and incentives affecting other strategic variables such as output. It then discusses the deepening of this framework with more complete assumptions and econometric specifications in order to simulate a merger’s quantitative effects on prices, output, and consumer welfare. Finally, it discusses the analysis of unilateral effects in markets where prices are set by auction or bilateral negotiation, and where innovation and product variety are particularly important features of competition.
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