Research contribution on brand-level price effects of mergers delivered to the Norwegian Competition Authority
Elias Braunfels, Arne R. Gramstad and Jostein Skaar are the authors of the research paper «Efficiency Gains vs. Internalization of Rivalry: Brand-Level Evidence from a Merger in the Mobile Telecom Market». The research project is funded by “The Price Regulation Fund” which is managed by the Norwegian Competition Authority.
Mergers can lead to both higher and lower prices. Prices may increase due to increased market power (internalization of rivalry), and they can decrease because of efficiency gains. Since higher prices reduce consumer welfare, considerations of which of these effects dominates are at the heart of competition policy.
The paper empirically investigates the brand-level price effects of the merger between Telia and Tele2 in the Norwegian mobile telecommunications market in early 2015. We find price decreases for products with substantial expected efficiency gains and price increases for products without large expected efficiency gains. These findings are consistent with the theoretical predictions of merger price effects. In aggregate, we do not identify significant price effects in either direction, which suggests that the total price effect of the merger was neutral.
Our results provide insights into the differential price effects on different products involved in mergers and feedback on the use of ex-ante analysis in competition policy decision.
Read the research paper here: Efficiency Gains vs. Internalization of Rivalry: Brand-Level Evidence from a Merger in the Mobile Telecom Market