TY - JOUR
T1 - Unilateral effects screens for partial horizontal acquisitions
T2 - the generalized HHI and GUPPI
AU - Brito, Duarte
AU - Osório, António
AU - Ribeiro, Ricardo
AU - Vasconcelos, Helder
N1 - Funding Information:
We would like to thank the Editor, Pierre Dubois, and two anonymous referees for their thorough and thoughtful reports. We would also like to thank Mariana Cunha, Gonçalo Faria, João Gata, William H. Greene, Petr Lachout, Martin Schmalz, Stefano Paleari, Pedro Pereira, Joana Pinho, Ana Rodrigues, Dimitrios Sotiros, Kunikazu Yoda, and seminars participants at Autoridade da Concorrência and Universidade Católica Portuguesa, as well as numerous participants at the 2016 EARIE in Lisbon, for helpful comments and suggestions. António Osório acknowledges financial support from the Spanish Ministerio of Ciencia y Innovación (ECO2016-75410-P) and GRODE. Helder Vasconcelos acknowledges financial support from Fundação para a Ciência e a Tecnologia (UID/ECO/04007/2013 and UID/ECO/04105/2013). All remaining errors are of course our own.
Publisher Copyright:
© 2018 Elsevier B.V.
PY - 2018/7
Y1 - 2018/7
N2 - Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization of the two most traditional indicators used to screen unilateral anti-competitive effects - the Herfindahl–Hirschman Index and the Gross Upward Price Pressure Index - to partial horizontal acquisition settings. The proposed generalized indicators are endogenously derived under a probabilistic voting model in which the manager of each firm is elected in a shareholder assembly between two potential candidates who seek to obtain utility from an exogenous rent associated with corporate office. The model (i) can cope with settings involving all types of owners and rights: owners that can be internal to the industry (rival firms) and external to the industry; and rights that can capture financial and corporate control interests, can be direct and indirect, can be partial or full, (ii) yields an endogenous measure of the owners ultimate corporate control rights, and (iii) can also be used - in case the potential acquisition is inferred to likely enhance market power - to devise divestiture structural remedies. We also provide an empirical application of the two proposed generalized indicators to several acquisitions in the wet shaving industry, with the objective of providing practitioners with a step-by-step illustration of how to compute them in antitrust cases.
AB - Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose a generalization of the two most traditional indicators used to screen unilateral anti-competitive effects - the Herfindahl–Hirschman Index and the Gross Upward Price Pressure Index - to partial horizontal acquisition settings. The proposed generalized indicators are endogenously derived under a probabilistic voting model in which the manager of each firm is elected in a shareholder assembly between two potential candidates who seek to obtain utility from an exogenous rent associated with corporate office. The model (i) can cope with settings involving all types of owners and rights: owners that can be internal to the industry (rival firms) and external to the industry; and rights that can capture financial and corporate control interests, can be direct and indirect, can be partial or full, (ii) yields an endogenous measure of the owners ultimate corporate control rights, and (iii) can also be used - in case the potential acquisition is inferred to likely enhance market power - to devise divestiture structural remedies. We also provide an empirical application of the two proposed generalized indicators to several acquisitions in the wet shaving industry, with the objective of providing practitioners with a step-by-step illustration of how to compute them in antitrust cases.
KW - Banzhaf power index
KW - Corporate control
KW - GUPPI
KW - HHI
KW - Partial horizontal acquisitions
KW - Screening indicators
UR - http://www.scopus.com/inward/record.url?scp=85045120802&partnerID=8YFLogxK
U2 - 10.1016/j.ijindorg.2018.03.005
DO - 10.1016/j.ijindorg.2018.03.005
M3 - Article
AN - SCOPUS:85045120802
SN - 0167-7187
VL - 59
SP - 127
EP - 189
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
ER -