How Accurate is the Coordinate Price Pressure Index to Predict Mergers’ Coordinated Effects?

Ivaldi, Marc and Lagos, Vicente (2018) How Accurate is the Coordinate Price Pressure Index to Predict Mergers’ Coordinated Effects? TSE Working Paper, n. 18-915, Toulouse

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Official URL: http://tse-fr.eu/pub/32620

Abstract

The Coordinate Price Pressure Index (CPPI) measures the incentives of two competitors to engage in a particular type of Parallel Accommodating Conduct (PAC). Specifically, it measures the incentives of a leader firm to initiate a unilateral percentage price increase, with the expectation that a follower firm will match it. Using a large set of simulated markets, we measure the accuracy of the index in terms of predicting the impact of a merger on firms’ incentives to engage in PAC. Results suggest that the CPPI only displays a fair performance when predicting an increase in firm’s incentives to engage in PAC, and only in mergers in which the diversion ratio between the target and the acquiring firm is low. However, the index displays a poor performance when predicting mergers with a significant anticompetitive effect.

Item Type: Monograph (Working Paper)
Language: English
Date: April 2018
Place of Publication: Toulouse
Uncontrolled Keywords: Coordinate Price Pressure Index, Parallel Accommodating Conduct, Merger Simulation
JEL codes: K21 - Antitrust Law
L41 - Monopolization; Horizontal Anticompetitive Practices
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 19 Apr 2018 15:43
Last Modified: 19 Apr 2018 15:43
OAI ID: oai:tse-fr.eu:32620
URI: http://publications.ut-capitole.fr/id/eprint/25939

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