Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 11/2012: A Note on Upward Pricing Pressure:The possibility of false positives.

Lars Mathiesen (), Øivind Anti Nilsen () and Lars Sørgard ()
Additional contact information
Lars Mathiesen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Øivind Anti Nilsen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Lars Sørgard: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: Farrell and Shapiro proposed a simple test of the possible upward pricing pressure (UPP) following a merger. They showed that the test may give false negatives, that is, indicate that a merger may not give an UPP, while a more comprehensive test would indicate the opposite. We show that their test applied to a case with asymmetric firms may give false positives.

Keywords: Unilateral merger effects; post-merger price effects.

JEL-codes: K21; L41

8 pages, May 8, 2012

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