Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93746
Authors: 
Christian, Michel
Year of Publication: 
2013
Series/Report no.: 
SFB/TR 15 Discussion Paper 409
Abstract: 
This paper proposes and empirically implements a framework for analyzing industry competition and the degree of joint profit maximization of merging firms in differentiated product industries. Using pre- and post-merger industry data, I am able to separate merging firms' intra-organizational pricing considerations from industry pricing considerations. The insights of the paper shed light on a long-standing debate in the theoretical literature about the consequences of organizational integration. Moreover, I propose a novel approach to directly estimate industry conduct that relies on ownership changes and input price variation. I apply my framework using data from the ready-to-eat cereal industry, covering the 1993 Post-Nabisco merger. My results show an increasing degree of joint profit maximization of the merged entities over the first two years after the merger, eventually leading to almost full maximization of joint profits. I find that between 14.3 and 25.6 percent of industry markups can be attributed to cooperative industry behavior, while the remaining markup is due to product differentiation of multi-product firms.
Subjects: 
Identification of Market Structure
Post-merger Internalization of Profits
Conduct Estimation
Ex-post Merger Evaluation
Estimation of Synergies
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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