Abstract
This paper lays out and extends a derivation of the “upward pricing pressure” (“UPP”) tool for analyzing unilateral competitive effects of horizontal mergers on differentiated products that is featured in the 2010 Guidelines. In the most novel extension, the merger alters the differentiated products’ qualities. The resulting tool analyzes whether the merger creates upward pressure on quality-adjusted or “hedonic” prices. Another extension applies where one firm acquires just a partial equity stake in a competing firm. The paper also develops the Gross Upward Market Power Pressure Index (GUMPPI) that generalizes UPP measures to include output as well as price effects.
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Professor of Economics and Public Affairs, Princeton University. Willig also serves as a senior consultant to Compass Lexecon, an economics consulting firm. Thanks to Janusz Ordover, Mark Israel, Bryan Keating, and John Morris for excellent collegial discussions and support on the topics of this paper. And thanks also for insightful comments to Dennis Carlton, Glen Weyl, Jay Ezrielev, Serge Moresi, and Steve Salop.
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Willig, R. Unilateral Competitive Effects of Mergers: Upward Pricing Pressure, Product Quality, and Other Extensions. Rev Ind Organ 39, 19–38 (2011). https://doi.org/10.1007/s11151-011-9307-7
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DOI: https://doi.org/10.1007/s11151-011-9307-7