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THE COMPETITIVE-NEIGHBORS APPROACH TO ANALYZING DIFFERENTIATED PRODUCT MERGERS

Document Cited in Related
Vincent
Published date01 July 2004
DOIhttps://doi.org/10.1016/S0193-5895(04)21009-0
Pages459-473
Date01 July 2004
AuthorPaul A. Johnson,James Levinsohn,Richard S. Higgins
THE COMPETITIVE-NEIGHBORS
APPROACH TO ANALYZING
DIFFERENTIATED PRODUCT
MERGERS
Paul A. Johnson, James Levinsohn and
Richard S. Higgins
ABSTRACT
Wepropose 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).
1. INTRODUCTION
A merger between companies with competing products may significantly lessen
competition and increase prices. Thus, one of the main goals in the analysis of
mergers is to identify which products significantly compete with one another. This
Antitrust Law and Economics
Research in Law and Economics, Volume21, 459–473
Copyright © 2004 by Elsevier Ltd.
All rights of reproduction in any form reserved
ISSN: 0193-5895/doi:10.1016/S0193-5895(04)21009-0
459

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