Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 20, 2020 erstellt
Description:
Farrell and Shapiro (F&S, 2010) proposed an Upward Pricing Pressure (UPP) approach to merger screening between two symmetrical firms. According to them, this UPP approach is more practical than concentration-based methods. However, the UPP fails because it does not incorporate all the theoretical effects which set the price. This article intends to close two specific gaps in the UPP. First an entire industry's case, which has a set of firms with asymmetric costs. Mathiesen et al. (2012) show that UPP screening could present a false-positives in asymmetric cases. In this sense, the present study includes a more efficient competitive fringe in the feedback effects that adjusts the pricing pressure effects. Second, as competitive fringe firms are price takers, demand's lack of representativeness is addressed. The study shows that in the model presented by F&S, the elasticity of demand is equal to one. However, in a market where prices tend to be higher than the equilibrium price, firms tend to operate in the elastic part of the demand curve. Thus, our results show that the UPP model with competitive fringe is Pareto efficient and subgame perfect Nash Equilibrium. Finally, after filling both gaps, the validity of the relevant-market term in industrial organization is discussed