Economics Research Works

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Replication Code for "Should We Expect Merger Synergies To Be Passed Through to Consumers?"
(2024-07-01) Sweeting, Andrew; Lecesse, Mario; Tao, Xuezhen
When reviewing horizontal mergers, antitrust agencies balance anticompetitive incentives, resulting from market power, with procompetitive incentives, created by efficiencies, assuming complete information and static, simultaneous move Nash equilibrium play. These models miss how a merged firm may prefer not to pass through efficiencies when rivals would respond by lowering their prices. We use an asymmetric information model, where rivals do not observe the size of the realized cost efficiency, to investigate how this incentive could affect post-merger prices. We highlight how the strength of this incentive will depend on the market structure of non-merging rivals and discuss alternative settings where similar issues arise.