Market Power absent Merger Review. Brewing in Peru

We examine the impact of no preventive merger reviews on market power. We use a standard oligopoly model and exploit atypically large and frequent variations in the structure and level of excise taxes to assess the impact of... [ view full abstract ]

We examine the impact of no preventive merger reviews on market power. We use a standard oligopoly model and exploit atypically large and frequent variations in the structure and level of excise taxes to assess the impact of industry consolidation on beer prices and their welfare consequences. Results suggest that an unrestrained brewer monopolist raised prices significantly above the competitive level. Conduct experienced a different pattern throughout our study period, with the exercise of market power atypically decreasing with industry concentration. Our estimates also suggest that the welfare costs of such conduct exceedingly outdo conservative estimates of enforcing preventive merger reviews.