Divestiture requirements as a tool for competition policy: a case from the Swedish beer market

We investigate the effect of divestitures on prices and welfare following the Carlsberg–Pripps merger in the Swedish beer market. Both difference-in-difference estimation and simulations using a random coefficients logit model suggest that divestitures are important for dampening price increases. Prices of divested brands fall by around 3% and the predicted price increase for Carlsberg falls from 3 to 1.6% as a result of the divestitures. To guide practice on divestitures, we investigate the role of the recipient and the number and characteristics of the divested products by simulating post-merger outcomes for all relevant cases. We find that in this setting with large multiproduct firms, the competition authority's most effective means to dampen adverse postmerger outcomes are to aim for a small recipient firm and attain a large number of divested products. Enforcing larger divestitures in terms of market share and raising the average cross-price elasticity between the merging parties' divested and retained products strengthen the dampening effect further.

Publication year:2015

BOF-keylabel:yes

IOF-keylabel:yes

BOF-publication weight:0.5

CSS-citation score:1

Authors:International

Authors from:Higher Education

Accessibility:Open