Conduct estimation via ownership change.

Résumé

This paper proposes a new form of estimating industry conduct. As an identification strategy, I use the structural ownership changes that occur due to a merger. Using both pre-merger and post-merger industry data, I look for the form of conduct that best predicts the market outcome both before and after the merger. I provide identification results for a new form of direct conduct estimation. Using both pre and post-merger data also enables me to use a new evaluation criterion when selecting the form of competition among a discrete ``menu'' of outcomes. In addition, I discuss ways to jointly estimate conduct and synergies resulting from a merger. Finally, I estimate industry conduct using data from the RTE cereal industry.