Mergers with differentiated products: the case of the ready-to-eat cereal industry

Authors
Citation
A. Nevo, Mergers with differentiated products: the case of the ready-to-eat cereal industry, RAND J ECON, 31(3), 2000, pp. 395-421
Citations number
39
Categorie Soggetti
Economics
Journal title
RAND JOURNAL OF ECONOMICS
ISSN journal
07416261 → ACNP
Volume
31
Issue
3
Year of publication
2000
Pages
395 - 421
Database
ISI
SICI code
0741-6261(200023)31:3<395:MWDPTC>2.0.ZU;2-#
Abstract
Traditional merger analysis is difficult to implement when evaluating merge rs in industries with differentiated products. I discuss an alternative, wh ich consists of demand estimation and the use of a model of postmerger cond uct to simulate the competitive effects of a merger. I estimate a brand-lev el demand system for ready-to-eat cereal using supermarket scanner data and use the estimates to (1) recover marginal costs, (2) simulate postmerger p rice equilibria, and (3) compute welfare effects, under a variety of assump tions. The methodology is applied to Jive mergers, two of which occurred an d for which I compare predicted to actual outcomes.