Cost Synergies and Post-Merger Predictions in Asymmetric Logit Environments

Using the experimental method we evaluate the Antitrust Logit Model (ALM), a merger simulation device used by U.S. antitrust authorities to help identify problematic horizontal mergers. We focus on environments with asymmetric sellers pre-merger. Our treatments include consolidations that generate merger-specific synergies, and variations in the magnitude of predicted post-merger price increases. Similar to previous research in symmetric environments, we find that Nash predictions explain poorly performance in specific markets. However, unlike previous research, the ALM here fails to serve even a screening role for specific markets. JEL Classifications: C9, L1, L4