Simulation Analysis On The Unilateral Effects Of Horizontal Merger Based On H-PCAIDS Model

It is the trend of development of modern enterprises to achieve rapid expansion of their scales through mergers and acquisitions. From the point of motivation of mergers and acquisitions, it is very difficult to find out mergers and acquisitions are simply to achieve economies of scale, to optimize the allocation of the resources or to increase market dominance, to obtain monopoly profits. Horizontal mergers may produce some anticompetitive effects, including unilateral effects and coordinated effects, and analyzing the unilateral effects is the key point of analysis of horizontal merger antitrust scrutiny. The antitrust authorities in Europe and America have introduced merger simulation technology into the evaluation and analysis of mergers to compensate the deficiency of the traditional structuralism analysis since 1990s. China’s anti monopoly started relatively late, and simulation technology for the acquisition of basic research and applications is still in the blank stage, so it is of urgent practical significance to study the simulation analysis.This paper introduces the connotation of merger simulation and its meaning for antitrust review. It is the biggest advantage of merger simulation to provide the quantitative evidence for antitrust review, which is not available in other ways. In addition, merger simulation analysis can analyze the offset effects that some factors like efficiency lay on the anti-competitive effects and the affects that the remedial measures like stripping and split lay on the mergers and acquisitions. However the selectivity problem of the models and the lack of data restrict the applications of the mergers simulation in the antitrust review. In addition, the relevant literature has studied the accuracy of the simulation analysis techniques’ predicting the economic impact of mergers and acquisitions and finds out the predicting accuracy depends on the fitting extent between the model and the industry. In this way, it is necessary to collect a lot of information of prior simulation effect on the actual occurrence of mergers and acquisitions to find out the industrial characteristics in selecting the model of mergers simulation analysis. In addition, we should also pay attention on some points such as, analyzing the demand system by choosing different models, using the structural estimation method at the same time, and emphasizing sensitivity analysis to be more convincing, to improve the reliability of the simulation.In order to reduce the model complexity and to guarantee the explanatory power at the same time, this paper alters the aggregation assumptions on the basis of the PCAIDS model, introduces the homogeneity of degree zero assumption, so as to construct the H-PCAIDS model, and deduces SH-PCAIDS model which is used to estimate the system of the demand of a double-product market through the matrix transformation. And then, the paper estimates the demand system of China’s refrigerator industry respectively with the two above models, evaluates the unilateral effects of horizontal mergers in the refrigerator industry of China utilizing the demand parameters accessed by the preceding evaluation. The empirical results show that the product substitution, market share and the increase of the efficiency have a significant impact on the unilateral effect. This paper has a clear understanding about the general steps of mergers simulation technology and about how to improve the reliability of the simulation analysis.We can safely conclude that simulation analysis is a method of pre-analysis through this paper and the rational use of simulation technology in the practice of the antitrust review can reduce the inherent defect of simulation analysis and avoid social welfare loss caused by the abuse of marker power due to mergers and acquisitions after the occurrence of merger. For this point, we put forward the following policy recommendations:antitrust review should stick to the principal of what reliability and validity is primary, whereas the efficiency is secondary; draw up the horizontal mergers guidelines of China and should has a reasonable grasp of the content of the guidelines; strengthen the mutual permeability of economy and law in the antitrust review, promote the international cooperation in antitrust review.