A Robust Test for Consumer Welfare Enhancing Mergers Among Sellers of Differentiated Products

Abstract

Recently developed tools are used to predict the effects of differentiated products mergers, but they require the assumption of a particular functional form for industry demand and any assumption is vulnerable to attack. This paper demonstrates that marginal cost reductions necessary to restore premerger prices can be calculated without making any assumption about demand, and it provides a robust and practical method for determining whether a particular merger enhances consumer welfare. Copyright 1996 by Blackwell Publishing Ltd.