Farrell and Shapiro (2008) have proposed a test – called the Upward Pricing Pressure (UPP) test – to evaluate potential unilateral effects of horizontal mergers. This comment shows that the UPP test – suitably reinterpreted and properly implemented – can be applied usefully also in industries where suppliers set prices through bidding competition.
How capacity constraints shape unilateral price effects in horizontal mergers
Examples include hospitals with a fixed number of beds, and hotels with a fixed number of rooms. In the article “Unilateral Price Effects in Horizontal...