Simulation as an Alternative to Structural Merger Policy in Differentiated Products Industries

Public policy toward horizontal mergers, as embodied in the case law and in the Horizontal Merger Guidelines issued in 1992 by the U.S. Department of Justice and Federal Trade Commission, is primarily structural. Relevant markets are first delineated; market shares are assigned; and particular market shares and levels of market concentration give rise to presumptions of illegality. While the presumptions can be overcome and there is much more than this to merger analysis, market delineation and market shares remain the heart and soul of horizontal merger policy. As the Supreme Court recently noted, “market definition generally determines the result of the case.”3

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