Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72432
Authors: 
Mariuzzo, Franco
Walsh, Patrick Paul
Whelan, Ciara
Year of Publication: 
2005
Series/Report no.: 
Working Paper Series, UCD Centre for Economic Research 05/08
Abstract: 
Thresholds defined on the level and change in the HHI (Herfindahl-Hirschmann Index) applied to market shares seem to be the main instrument to select notified mergers for investigation in both the EU and US. We question the use of such a selection rule in differentiated products industries. We propose the use of a structural approach to apply HHI thresholds based on profit shares rather than market shares. We illustrate our point using product data for Retail Carbonated Soft Drinks (Price, Market Share and Characteristics). We estimate company (product) mark-ups consistent with a structural model of equilibrium, using demand primitives from a Nested Logit model and a Random Coefficient model. We provide an example where the HHI thresholds based on profit shares identify potentially damaging mergers not captured by applying thresholds to output shares, or conversely, identify mergers of no concern that would be selected on the basis of output shares.
Subjects: 
Market Shares
Market Power
Differentiated Products Industries
Merger Screening
JEL: 
K2
L11
L25
L40
L81
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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