A retrospective merger analysis in the U.K. videogame market

Abstract

We study the effect of a merger in a dynamic high-technology industry-the videogame market-which is characterized by the frequent introduction of new products. To assess the impact of the merger between two large specialist retailers in the United Kingdom-Game Group PLC and Games Station Limited-we perform a difference-in-differences analysis comparing the price evolution of the merging parties with that of their 7 major competitors on an original sample of 196 videogames belonging to 6 different consoles. The results of our econometric analyses suggest that there has been a reduction in the general level of prices of both new and pre-owned games after the merger. This decline has been more marked for the merging parties, which suggests that the merger between Game Group PLC and Games Station Limited did not lead to a substantial lessening of competition; rather, it is consistent with the existence of efficiency gains.