Unilateral Effects of Mergers that Enhance Product Quality

This article derives simple and intuitive formulas for calculating the effects that mergers that enhance product quality have on nominal and hedonic prices. If the value of quality enhancements can be estimated, the formulas proposed here can be applied using data realistically available in the merger investigations context and should therefore be valuable additions to the practitioner's toolbox. This article also explores strategic effects between the merged entity and non-merging rivals in the presence of merger-specific quality enhancements, and it highlights the importance in ex post merger assessments of paying close attention to non-merging rivals' price responses to the merger.