| Public policy toward mergers and acquisitions has principally been concerned with their potential anti-competitiveness effects. However, the literature includes surprisingly few studies that empirically document actual price changes before and after a significant merger. This dissertation takes advantage of a rare data opportunity in the supermarket industry of Madison, Wisconsin, where we collected price and advertising data before, during, and after a major merger event.; The first essay empirically evaluates the price effect of this horizontal supermarket acquisition. After controlling for a variety of fixed effects, we show that the overall market price level increased 2% after the acquisition. The second essay studies how the strategic pricing behaviors might affect the post-merger price outcome and empirically tests the theory of "loss-leader" pricing of multiproduct retailers using price variations created by this merger event. I found that the post-acquisition average price level of most-advertised products dropped by 4.6-10%, while the average price level of least-advertised products went up by 4.8-9.5% in two major incumbent chains. I show, through a spatial model of retailing competition, that this puzzling asymmetric post-merger price movement is consistent with the rationale of "loss-leader" pricing. The third essay (independent from the last two essays) examines the price dispersion of short-term life insurance policies after the launch of Internet comparison sites in the mid 1990s. I found that average prices came down by 4.6% at the time the Internet comparison sites became available. |
