Mergers with differentiated products: The case of the ready-to-eat cereal industry

Aviv Nevo*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

285 Scopus citations

Abstract

Traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products. I discuss an alternative, which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger. I estimate a brand-level demand system for ready-to-eat cereal using supermarket scanner data and use the estimates to (1) recover marginal costs, (2) simulate postmerger price equilibria, and (3) compute welfare effects, under a variety of assumptions. The methodology is applied to five mergers, two of which occurred and for which I compare predicted to actual outcomes.

Original languageEnglish (US)
Pages (from-to)395-421
Number of pages27
JournalRAND Journal of Economics
Volume31
Issue number3
DOIs
StatePublished - 2000

ASJC Scopus subject areas

  • Economics and Econometrics

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