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Baker, Jonathan B.; Reitman, David --- "Research Topics in Unilateral Effects Analysis" [2012] ELECD 215; in Elhauge, R. Einer (ed), "Research Handbook on the Economics of Antitrust Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Antitrust Law

Editor(s): Elhauge, R. Einer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848440807

Section: Chapter 2

Section Title: Research Topics in Unilateral Effects Analysis

Author(s): Baker, Jonathan B.; Reitman, David

Number of pages: 28

Extract:

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 dif-
ferentiated 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, ...