Assessing Coordinated Effects in Mergers with Price Leadership Models

Dr. Rosa Abrantes-Metz, Dr. Albert Metz, Dr. Pedro Erdei-Gonzaga, and Ben Wagner discuss the use of price leadership models to assess coordinated effects in mergers.

Price leadership models are economic tools that predict how mergers may lead to tacit collusion, where firms follow a pricing leader, resulting in higher prices and reduced competition. These models help assess the risk of tacit collusion, especially in mergers, without explicit agreements between competitors. These models offer a quantitative approach for assessing coordinated effects in mergers, addressing a gap in antitrust reviews that are typically focused on unilateral effects.

The authors examine price leadership models, their benefits for merger review, and their practical application challenges, while emphasizing the importance of integrating these models with tools like cartel screens.

Read the article. (subscription required)