NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Empirical Properties of Diversion Ratios

Christopher T. Conlon, Julie Holland Mortimer

NBER Working Paper No. 24816
Issued in July 2018
NBER Program(s):Industrial Organization Program

A diversion ratio, which measures the fraction of consumers that switch from one product to an alternative after a price increase, is a central calculation of interest to antitrust authorities for analyzing horizontal mergers. Two ways to measure diversion are: the ratio of estimated cross-price to own-price demand derivatives, and second-choice data. Policy-makers may be interested in either, depending on whether they are concerned about the potential for small but widespread price increases, or product discontinuations. We estimate diversion in two applications -- using observational price variation and experimental second-choice data respectively -- to illustrate the trade-offs between different empirical approaches. Using our estimates of diversion, we identify candidate products for divestiture in a hypothetical merger.

download in pdf format
   (674 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24816

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us