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Merger Simulation
Merger simulation is a commonly used technique when analyzing potential welfare costs and benefits of mergers between firms. Merger simulation models differ with respect to assumed form of competition that best describes the market (e.g. differentiated Bertrand competition, Cournot competition, auction models, etc.) as well as the structure of the chosen demand system (e.g. linear or log-linear demand, logit, almost ideal demand system (AIDS), etc.)Oliver Budzinski and Isabel Ruhmer, ''Merger Simulation in Competition Policy: A Survey'', Journal of Competition Law & Economics (2010), 6(2): 277-319. Simulation Methods Cournot Oligopoly Farrell and Shapiro (1990) highlighted issues of the Department of Justice’s Merger Guidelines (1984), with its use of Herfindahl-Hirschman indices. The main issues they raised were the base assumptions that: # Outputs remain unchanged in the merger process (both companies retained their initial outputs); # There is a reliable and inverse re ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Merger
Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect of strategic management, M&A can allow enterprises to grow or downsize, and change the nature of their business or competitive position. Technically, a is a legal consolidation of two business entities into one, whereas an occurs when one entity takes ownership of another entity's share capital, equity interests or assets. A deal may be euphemistically called a ''merger of equals'' if both CEOs agree that joining together is in the best interest of both of their companies. From a legal and financial point of view, both mergers and acquisitions generally result in the consolidation of assets and liabilities under one entity, and the distinction between the two is not always clear. In most countries, mergers and acquisitions must comp ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Differentiated Bertrand Competition
As a solution to the Bertrand paradox in economics, it has been suggested that each firm produces a somewhat differentiated product, and consequently faces a demand curve that is downward-sloping for all levels of the firm's price. An increase in a competitor's price is represented as an increase (for example, an upward shift) of the firm's demand curve. As a result, when a competitor raises price, generally a firm can also raise its own price and increase its profits. Calculating the differentiated Bertrand model *q1 = firm 1's demand, *q1≥0 *q2 = firm 2's demand, *q1≥0 *A1 = Constant in equation for firm 1's demand *A2 = Constant in equation for firm 2's demand *a1 = slope coefficient for firm 1's price *a2 = slope coefficient for firm 2's price *p1 = firm 1's price level pr unit *p2 = firm 2's price level pr unit *b1 = slope coefficient for how much firm 2's price affects firm 1's demand *b2 = slope coefficient for how much firm 1's price affects firm 2's demand *q1=A1-a1* ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cournot Competition
Cournot competition is an economic model used to describe an industry structure in which companies compete on the amount of output they will produce, which they decide on independently of each other and at the same time. It is named after Antoine Augustin Cournot (1801–1877) who was inspired by observing competition in a spring water duopoly. It has the following features: * There is more than one firm and all firms produce a homogeneous product, i.e., there is no product differentiation; * Firms do not cooperate, i.e., there is no collusion; * Firms have market power, i.e., each firm's output decision affects the good's price; * The number of firms is fixed; * Firms compete in quantities rather than prices; and * The firms are economically rational and act strategically, usually seeking to maximize profit given their competitors' decisions. An essential assumption of this model is the "not conjecture" that each firm aims to maximize profits, based on the expectation that its own ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Logit
In statistics, the logit ( ) function is the quantile function associated with the standard logistic distribution. It has many uses in data analysis and machine learning, especially in data transformations. Mathematically, the logit is the inverse of the standard logistic function \sigma(x) = 1/(1+e^), so the logit is defined as :\operatorname p = \sigma^(p) = \ln \frac \quad \text \quad p \in (0,1). Because of this, the logit is also called the log-odds since it is equal to the logarithm of the odds \frac where is a probability. Thus, the logit is a type of function that maps probability values from (0, 1) to real numbers in (-\infty, +\infty), akin to the probit function. Definition If is a probability, then is the corresponding odds; the of the probability is the logarithm of the odds, i.e.: :\operatorname(p)=\ln\left( \frac \right) =\ln(p)-\ln(1-p)=-\ln\left( \frac-1\right)=2\operatorname(2p-1) The base of the logarithm function used is of little importance in t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Almost Ideal Demand System
The Almost Ideal Demand System (AIDS) is a consumer demand model used primarily by economists to study consumer behavior. The AIDS model gives an arbitrary second-order approximation to any demand system and has many desirable qualities of demand systems. For instance it satisfies the axioms of order, aggregates over consumers without invoking parallel linear Engel curves, is consistent with budget constraints, and is simple to estimate. Model The AIDS model is based on a first specification of a cost/expenditure function c(u,p): :\log(c(u,p))=\alpha_+\sum_\alpha_\log(p_)+\frac\sum_\sum_\gamma_^\log(p_)\log(p_)+u\beta_\prod_p_^ where ''p'' stand for price of L goods, and ''u'' the utility level. This specification satisfies homogeneity of order 1 in prices, and is a second order approximation of any cost function. From this, demand equations are derived (using Shephard's lemma), but are however simpler to put in term of budget shares w_i = \frac : : w_=\alpha_+\sum_\gamma_\lo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economies Of Scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables an increase in scale. At the basis of economies of scale, there may be technical, statistical, organizational or related factors to the degree of market control. This is just a partial description of the concept. Economies of scale apply to a variety of the organizational and business situations and at various levels, such as a production, plant or an entire enterprise. When average costs start falling as output increases, then economies of scale occur. Some economies of scale, such as capital cost of manufacturing facilities and friction loss of transportation and industrial equipment, have a physical or engineering basis. The economic concept dates back to Adam Smith and the idea of obtaining larger production returns through the use ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
