- Research Handbooks in Law and Economics series
Edited by Einer R. Elhauge
2 Research topics in unilateral effects analysis Jonathan B. Baker and David Reitman* I INTRODUCTION If a merger harms competition by leading the merged firms to compete less aggressively, holding constant the strategies adopted by nonmerging rivals, those harms are said to reflect adverse unilateral effects.1 Adverse unilateral effects are usually modeled as higher prices, but they may also involve harm to buyers on other dimensions of competition, such as reduced output, lower quality, or slowed new product introduction. Unilateral effects have been important in merger analysis since the late 1980s, when newly developed empirical methodologies and newly-available computerized point-of-sale scanner data for recording individual retail transactions began to make it possible to identify and measure the loss of direct competition among sellers of differentiated products.2 The analytical framework the enforcement agencies began to employ was codified in the 1992 Horizontal Merger Guidelines,3 and remains widely used today.4 Our focus in this chapter is on a subset of the possible unilateral effects that may arise from horizontal merger. We emphasize competitive effects that arise when the merging firms sell differentiated products without binding capacity constraints, and interact by * We would like to thank Gopal Das Varma, Luke Froeb, Serge Moresi, Aviv Nevo, and Greg Werden for their comments and suggestions. 1 For a similar definition, see Gregory J. Werden and Luke M. Froeb, Unilateral Competitive Effects of Horizontal Mergers, in Handbook of Antitrust Economics 43 (Paolo Buccirossi ed., 2008); Gregory J. Werden, Unilateral Competitive Effects of Horizontal Mergers I:...
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