Evaluating merger effects

Abstract

This paper proposes a new algorithm to identify the potential effect of mergers by comparing the outcomes of interest in areas of overlap for the merging parties vis-à-vis areas where no overlap exists within a difference-in-differences estimation framework. Utilizing our proposed algorithm enables researchers and policymakers to perform retrospective merger evaluation studies that look at the effects of mergers on both price and non-price aspects. We demonstrate the applicability and value of our proposed methodology by examining the effects on price and product variety of four mergers of the late 1980s and the 1990s on the U.K. car market.