This chapter explains the application of antitrust law to merger and acquisitions, especially hor... more This chapter explains the application of antitrust law to merger and acquisitions, especially horizontal transactions, which involve direct competitors. The chapter outlines the analysis the U.S. enforcement agencies set out in their Horizontal Merger Guidelines―a fact-intensive analysis focusing on the precise competitive interaction between the merging firms and the competitive environment in which they operate. The chapter focuses mainly on unilateral effects, which arise from the elimination of head-to-head competition between the merging firms. Several distinct unilateral effects are distinguished and illustrated with real-world examples. In particular, the chapter explains how modern economic analysis identifies the relatively few horizontal mergers and acquisitions found to violate antitrust law.
... substitutes and complements. In that event, the first-order condition for profit maximization... more ... substitutes and complements. In that event, the first-order condition for profit maximization can rearranged to solve for the monopoly mark-up over the prevail-ing price. As Froeb and Werden (1991, pp. 35-36) show, this mark-up is ...
Public policy toward horizontal mergers, as embodied in the case law and in the Horizontal Merger... more Public policy toward horizontal mergers, as embodied in the case law and in the Horizontal Merger Guidelines issued in 1992 by the U.S. Department of Justice and Federal Trade Commission, is primarily structural. Relevant markets are first delineated; market shares are assigned; and particular market shares and levels of market concentration give rise to presumptions of illegality. While the presumptions can be overcome and there is much more than this to merger analysis, market delineation and market shares remain the heart and soul of horizontal merger policy. As the Supreme Court recently noted, “market definition generally determines the result of the case.”3
Teach your MBA students how to use economics to solve business problems with this breakthrough te... more Teach your MBA students how to use economics to solve business problems with this breakthrough text. Froeb/McCann's MANAGERIAL ECONOMICS: A PROBLEM SOLVING APPROACH, 2E covers traditional material using a problem-based pedagogy built around common business mistakes. Models are used sparingly, and then only to the extent that they help students figure out why mistakes are made, and how to fix them. This edition's succinct, fast-paced presentation and challenging, interactive applications place students in the role of a decision maker who has to identify mistakes that reduce profits, and propose solutions to bring profits back up. The lively book provides an excellent ongoing reference for students pursuing business careers. New chapters and updates highlight mistakes that precipitated the financial crisis. With MANAGERIAL ECONOMICS, 2E your students are taught to use economics to not only identify profitable decisions, but also how to implement them within an organization.
The journal of law, economics, & organization, Oct 1, 1994
... The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy ... more ... The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy ... Luke M. Froeb Vanderbilt University ... Nash equilibrium in prices and constant marginal cost, it is straightforward to estimate critical demand parameters and simulate mergers In this way ...
This chapter explains the application of antitrust law to merger and acquisitions, especially hor... more This chapter explains the application of antitrust law to merger and acquisitions, especially horizontal transactions, which involve direct competitors. The chapter outlines the analysis the U.S. enforcement agencies set out in their Horizontal Merger Guidelines―a fact-intensive analysis focusing on the precise competitive interaction between the merging firms and the competitive environment in which they operate. The chapter focuses mainly on unilateral effects, which arise from the elimination of head-to-head competition between the merging firms. Several distinct unilateral effects are distinguished and illustrated with real-world examples. In particular, the chapter explains how modern economic analysis identifies the relatively few horizontal mergers and acquisitions found to violate antitrust law.
... substitutes and complements. In that event, the first-order condition for profit maximization... more ... substitutes and complements. In that event, the first-order condition for profit maximization can rearranged to solve for the monopoly mark-up over the prevail-ing price. As Froeb and Werden (1991, pp. 35-36) show, this mark-up is ...
Public policy toward horizontal mergers, as embodied in the case law and in the Horizontal Merger... more Public policy toward horizontal mergers, as embodied in the case law and in the Horizontal Merger Guidelines issued in 1992 by the U.S. Department of Justice and Federal Trade Commission, is primarily structural. Relevant markets are first delineated; market shares are assigned; and particular market shares and levels of market concentration give rise to presumptions of illegality. While the presumptions can be overcome and there is much more than this to merger analysis, market delineation and market shares remain the heart and soul of horizontal merger policy. As the Supreme Court recently noted, “market definition generally determines the result of the case.”3
Teach your MBA students how to use economics to solve business problems with this breakthrough te... more Teach your MBA students how to use economics to solve business problems with this breakthrough text. Froeb/McCann's MANAGERIAL ECONOMICS: A PROBLEM SOLVING APPROACH, 2E covers traditional material using a problem-based pedagogy built around common business mistakes. Models are used sparingly, and then only to the extent that they help students figure out why mistakes are made, and how to fix them. This edition's succinct, fast-paced presentation and challenging, interactive applications place students in the role of a decision maker who has to identify mistakes that reduce profits, and propose solutions to bring profits back up. The lively book provides an excellent ongoing reference for students pursuing business careers. New chapters and updates highlight mistakes that precipitated the financial crisis. With MANAGERIAL ECONOMICS, 2E your students are taught to use economics to not only identify profitable decisions, but also how to implement them within an organization.
The journal of law, economics, & organization, Oct 1, 1994
... The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy ... more ... The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy ... Luke M. Froeb Vanderbilt University ... Nash equilibrium in prices and constant marginal cost, it is straightforward to estimate critical demand parameters and simulate mergers In this way ...
In this paper, we characterize adversarial decision-making as a choice between competing interpre... more In this paper, we characterize adversarial decision-making as a choice between competing interpretations of evidence ("models") constructed by interested parties. We show that if a court cannot perfectly determine which party's model is more likely to have generated the evidence, then adversaries face a tradeoff: a model further away from the most likely interpretation has a lower probability of winning, but also a higher payoff following a win. We characterize equilibrium, in which both adversaries construct optimal models, and use the characterization to compare adversarial decision-making to an inquisitorial benchmark. We find that adversarial decisions are biased, and the bias favors the party with the less likely, and more extreme, interpretation of the evidence. Court bias disappears as the court is better able to distinguish between the likelihoods of the competing models, or as the amount of evidence grows.
Licensing technology essential to a standard can present a holdup problem. After designing new pr... more Licensing technology essential to a standard can present a holdup problem. After designing new products incorporating a standard, a manufacturer could be confronted by an innovator asserting patent rights to essential technology. This holdup problem can be solved with a damages remedy provided by antitrust or some other body of law, but a damages remedy can reduce the innovator's licensing revenue and thereby retard innovation. The availability of an ex post damages remedy also alters the licensing terms in ex ante bargaining with the result that fewer socially beneficial R&D projects are undertaken.
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