THE COMPETITIVE-NEIGHBORS APPROACH TO ANALYZING DIFFERENTIATED PRODUCT MERGERS

Abstract

We propose a method for analyzing mergers that uses product characteristics to identify products that compete with each other. Products that compete with one another are termed competitive-neighbors. This method does not require aggregation or complicated econometric modeling and is based on sound economic theory. The treatment emphasizes the difference between characteristics that are differentiated by their level of quality (vertical differentiation) and characteristics for which tastes differ across consumers (horizontal differentiation).

Citation

Johnson, P.A., Levinsohn, J. and Higgins, R.S. (2004), "THE COMPETITIVE-NEIGHBORS APPROACH TO ANALYZING DIFFERENTIATED PRODUCT MERGERS", Kirkwood, J.B. (Ed.) Antitrust Law and Economics (Research in Law and Economics, Vol. 21), Emerald Group Publishing Limited, Bingley, pp. 459-473. https://doi.org/10.1016/S0193-5895(04)21009-0