In this chapter, the author explains why gross margins and diversion ratios are crucial for understanding the economic principles that underlie the unilateral effects of horizontal mergers involving differentiated products, and for quantifying these unilateral effects.
This chapter appears in Antitrust Economics for Lawyers. For more information, click here.
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...