Corporate & Securities Law

Coate on Unilateral Effects at the FTC

FTC economist Malcolm Coate has posted Unilateral Effects Under the Guidelines: Models, Merits and Merger Policy to SSRN.  Here’s the abstract:

This paper models FTC unilateral effects merger policy using a broad sample of 153 investigations undertaken between 1993 and 2005. Standard unilateral effects analysis proposes a range of models for competitive effects. A review of the files suggests that half of the sample is evaluated with a dominant firm/monopoly model, while the bulk of the other cases use some form of generic spatial analysis. Bertrand and Cournot structures only appear potentially relevant in about a dozen cases each. Statistical modeling shows it is relatively easy to predict the outcomes of the investigations, using models based on either the full sample or a limited sample that excludes the two-to-one mergers. In addition to the standard structural variables (significant rivals, fringe competition, market leadership, and change in the Herfindahl), entry, performance evidence, and vertical variables significantly affect the probability of a merger challenge. Finally, the Bush administration had no statistically significant effect on FTC enforcement policy.

Coate’s work represents an interesting line of inquiry which examines internal FTC files to understand merger enforcement in practice at the agency.

Full post as published by Truth on the Market on October 01, 2008 (boomark / email).