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.
Assessing umbrella pricing incentives
When collusive agreements involve a subset of firms in an industry, they may create the incentive and ability for firms that are not participants in the cartel...