THE POTENTIAL FOR SIGNIFICANT INACCURACIES IN MERGER SIMULATION MODELS
This paper considers the role that merger simulation models should play in European merger control. The use of these models, as off-the-shelf instruments to assess the economic effects of mergers, has become increasingly widespread in recent years. However, contrary to some claims, merger simulation models do not allow investigators to avoid much of the competitive effects analysis relating to the relevant economic market, nor do they necessarily provide more precision to merger control. Without understanding the limitations of such models and the circumstances under which they can and should be usefully applied, they may not just be useless, but dangerous in the sense of providing possibly spurious results with spurious claimed accuracy. This paper argues that any merger simulation models used should be "bespoke" models, rather than off-the-shelf models, but cautions that even bespoke models will frequently not be as useful as is often claimed. This is not to deny that there are occasions when well-constructed bespoke models are genuinely useful and do offer genuine improvements in merger control.
* Vice President of European Competition Policy at CRA International, London (mwalker{at}crai.co.uk) and Visiting Professor at Loughborough University Business School (m.walker{at}lboro.ac.uk). The views expressed in this paper do not purport to be the views of CRA International.
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