Quantitative Analysis Of Competitive Effects For Antitrust. Day 1. Luke Froeb Owen Graduate School of Management Vanderbilt University April, 2003. Case Studies Showing How Modeling is Used in Antitrust. WorldCom-Sprint Consumer Branded Product Carnival-Princess.
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Owen Graduate School of Management
Consumer Branded Product
WorldCom: 5.4% Sprint: 8.9%
WorldCom: 2.2% Sprint: 5.1%
But always increases quantity
Grocery Store Merger
Parking Lot Merger
Survey density in Charlotte, NC
Dots represent grocery stores
Choice depends on price, distance, and “noise”Model-Based Simulation:Kroger + Winn Dixie
What if we can’t estimate demand?
Modelling choices and trade-offs
Accounting for efficiencies
How do you trade off a 10% marginal cost reduction against a 400 point change in HHI?
If one firm increases price, its rivals gain quantity in proportion to existing shares
Implies all goods are substitutes
Implies margins proportional to shares
Implies cross elasticities proportional to shares
These restrictive forms require less data
One brand level elasticity or marginSolution: Ask Less of Data byMaking Intuitive Assumptions
Would have allowed MCI-Sprint, but not beer