An Implementation of the Hypothetical Monopolist Test described in the 2010 Horizontal Merger Guidelines.
# S4 method for Bertrand
HypoMonTest(object,prodIndex,ssnip=.05,...)
# S4 method for ANY
calcPricesHypoMon(object,prodIndex)
# S4 method for ANY
calcPriceDeltaHypoMon(object,prodIndex)
# S4 method for Bertrand
diversionHypoMon(object,prodIndex,...)
# S4 method for AIDS
diversionHypoMon(object)Let k denote the number of products produced by all firms playing the Bertrand pricing game.
An instance of one of the classes listed above.
A vector of product indices that are to be placed under the control of the Hypothetical Monopolist.
A number between 0 and 1 that equals the threshold for a “Small but Significant and Non-transitory Increase in Price” (SSNIP). Default is .05, or 5%.
Pass options to the optimizer used to solve for equilibrium prices.
HypoMonTest returns TRUE if a profit-maximizing
Hypothetical Monopolist who controls the products indexed by
‘prodIndex’ would increase the price of at least one of the merging
parties' products in ‘prodIndex’ by a ‘ssnip’, and
FALSE otherwise. HypoMonTest returns an error if ‘prodIndex’
does not contain at least one of the merging parties
products.
calcPriceDeltaHypoMon returns a vector of proportional price changes for
all products placed under the control of the Hypothetical
Monopolist (i.e. all products indexed by ‘prodIndex’).\
calcPricesHypoMon is identical, but for price levels.
diversionHypoMon returns a k x k matrix of diversions,
where element i,j is the diversion from product i to product j.
HypoMonTest is an implementation of the Hypothetical Monopolist Test
on the products indexed by ‘prodIndex’ for a ‘ssnip’. The
Hypothetical Monopolist Test determines whether a profit-maximizing
Hypothetical Monopolist who controls the products indexed by
‘prodIndex’ would increase the price of at least one of the merging
parties' products in ‘prodIndex’ by a
small, significant, and non-transitory amount (i.e. impose a SSNIP).
calcPriceDeltaHypoMon calculates the price changes
relative to (predicted) pre-merger prices that a
Hypothetical Monopolist would impose on the products indexed by
‘prodIndex’,
holding the prices of products not
controlled by the Hypothetical Monopolist fixed at pre-merger
levels. With the exception of ‘AIDS’, the
calcPriceDeltaHypoMon for all the classes listed above
calls calcPricesHypoMon to compute price
levels. calcPriceDeltaHypoMon is in turn called by
HypoMonTest.
diversionHypoMon calculates the matrix of revenue
diversions between all products included in the merger simulation,
irrespective of whether or not they are also included in
‘prodIndex’. This matrix is useful for diagnosing whether or not a
product not included in ‘prodIndex’ may have a higher revenue diversion
either to or from a product included in ‘prodIndex’. Note that the ‘AIDS’
diversionHypoMon method does not contain the ‘prodIndex’
argument, as AIDS revenue diversions are only a function of demand parameters.
U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines. Washington DC: U.S. Department of Justice, 2010. http://www.justice.gov/atr/public/guidelines/hmg-2010.html (accessed July 29, 2011).