
Abstract
This paper proposes and empirically implements a framework for analyzing industry competition and the degree of joint profit maximization of merging firms in differentiated product industries. Using pre- and post-merger industry data, I am able to separate merging firms' intra-organizational pricing considerations from industry pricing considerations. The insights of the paper shed light on a long-standing debate in the theoretical literature about the consequences of organizational integration. Moreover, I propose a novel approach to directly estimate industry conduct that relies on ownership changes and input price variation. I apply my framework using data from the ready-to-eat cereal industry, covering the 1993 Post-Nabisco merger. My results show an increasing degree of joint profit maximization of the merged entities over the first two years after the merger, eventually leading to almost full maximization of joint profits. I find that between 14.3 and 25.6 percent of industry markups can be attributed to cooperative industry behavior, while the remaining markup is due to product differentiation of multi-product firms.
Item Type: | Paper |
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Form of publication: | Preprint |
Keywords: | Identification of Market Structure, Post-merger Internalization of Profits, Conduct Estimation, Ex-post Merger Evaluation, Estimation of Synergies |
Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > C5 - Wettbewerbspolitik als Steuerung von Wettbewerbsprozessen |
Subjects: | 300 Social sciences > 330 Economics |
URN: | urn:nbn:de:bvb:19-epub-17233-4 |
Language: | English |
Item ID: | 17233 |
Date Deposited: | 09. Oct 2013, 12:05 |
Last Modified: | 04. Nov 2020, 12:59 |