Merger analysis with endogenous prices and product qualities - Generalized theorem and application to the U.S. airline industry /

Saved in:
Bibliographic Details
Author / Creator:Qiu, Ziyi, author.
Ann Arbor : ProQuest Dissertations & Theses, 2015
Description:1 electronic resource (51 pages)
Format: E-Resource Dissertations
Local Note:School code: 0330
URL for this record:
Hidden Bibliographic Details
Other authors / contributors:University of Chicago. degree granting institution.
Notes:Advisors: Dennis W. Carlton Committee members: Dennis Carlton; Steve Levitt; Chad Syverson.
Dissertation Abstracts International, Volume: 77-05(E), Section: A.
Summary:This paper studies firms' endogenous choices of prices and product qualities pre- and post-mergers. Different from the current merger guidelines which focus on the merger effect on prices with exogenous product qualities, this paper allows firms to use product qualities as another instrument to control their market performance. The paper finds that firms' adjustment of post merger prices and product qualities depends on the pre-merger level of market share, the net benefit of improving the product quality, and the threshold market share. A generalized theorem is proved to characterize the conditions to predict post-merger outcomes, in particular the changes of post-merger market shares, product qualities and prices for both the merged and non-merging firms. A real application to study the 2010 merger of the United and Continental Airlines demonstrates that the theorem achieves high prediction accuracy in predicting the post-merger outcomes. In addition, the paper considers the consumer's preference changes and firms' cost efficiency gains post-merger. The changes in post-merger market outcomes are decomposed into four effects: (1) the merger effect; (2) the consumer's preference effect; (3) the firms' cost efficiency effect; and (4) the other effect.