Working Paper: CEPR ID: DP14979
Authors: Volker Nocke; Michael Whinston
Abstract: Concentration-based screens for horizontal mergers, such as thoseemployed in the US DOJ and FTC Horizontal Merger Guidelines,play a central role in merger analysis. However, the basis forthese screens, in both form and level, remains unclear. We show thatthere is both a theoretical and an empirical basis for focusing solelyon the change in the Herfindahl index, and ignoring its level, inscreening mergers for whether their unilateral effects will harm consumers.We also argue, again both theoretically and empirically, that thelevels at which the presumptions currently are set may be too lax,especially with regards to safe harbors.
Keywords: horizontal merger; oligopoly; Herfindahl index; market concentration; market power
JEL Codes: L40; L13; D43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| change in Herfindahl index (ΔHHI) (L19) | consumer welfare harm (D69) |
| change in Herfindahl index (ΔHHI) (L19) | required efficiency gains (D61) |
| post-merger HHI (L19) | consumer welfare harm (D69) |
| change in Herfindahl index (ΔHHI) (L19) | presumptions of anticompetitive effects (L49) |