Affiliation:
1. Department of Economics, Södertörn University and KU Leuven, Naamsestraat 69, B-3000 Leuven, Belgium (e-mail: )
2. Department of Economics, KU Leuven, Naamsestraat 69, B-3000 Leuven, Belgium (e-mail: )
Abstract
We analyze a large merger in the Swedish market for analgesics (painkillers). The merging firms raised prices by 40 percent, and some outsiders raised prices by more than 10 percent. We confront these changes with predictions from a merger simulation model. With basic supply side assumptions, the models correctly or moderately underpredict the merging firms' price increase. However, they predict a larger price increase for the smaller firm, which was not the case in practice, and they underpredict the outsiders' responses. We consider several supply side explanations: a plausible cost increase after the merger and the possibility of partial collusion. (JEL C63, D22, G34, L11, L25, L65)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
58 articles.
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