Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry
Year: 2000
Type: article
Abstract: Traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products. I discuss an alternative, which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger. I estimate a brand-level demand system for ready-to-eat cereal using supermarket scanner data and use the estimates to (1) recover marginal costs, (2) simulate postmerger price equilibria, and (3) compute welfare effects, under a variety of assumptions. The methodology is applied to five mergers, two of which occurred and for which I compare predicted to actual outcomes.
Source: The RAND Journal of Economics
DOI: 10.2307/2600994
Author: Aviv Nevo
Institution: University of California, Berkeley
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2018772681