Working Paper: NBER ID: w27533
Authors: Volker Nocke; Michael D. Whinston
Abstract: Concentration-based screens for horizontal mergers, such as those employed in the US DOJ and FTC Horizontal Merger Guidelines, play a central role in merger analysis. However, the basis for these screens, in both form and level, remains unclear. We show that there is both a theoretical and an empirical basis for focusing solely on the change in the Herfindahl index, and ignoring its level, in screening mergers for whether their unilateral effects will harm consumers. We also argue, again both theoretically and empirically, that the levels at which the presumptions currently are set may allow mergers to proceed that cause consumer harm.
Keywords: horizontal mergers; Herfindahl index; merger guidelines; consumer welfare
JEL Codes: L0; L4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| change in HHI (L19) | required efficiency gains (D61) |
| current merger guidelines (G34) | consumer harm (D18) |
| change in HHI (L19) | modifying concentration screens (D30) |
| required efficiency gains (D61) | consumer harm (D18) |
| change in HHI (L19) | consumer welfare (D69) |
| post-merger HHI level (L19) | consumer welfare (D69) |