Identification and Estimation of Intra-Firm and Industry Competition via Ownership Change

Résumé

In this paper, I estimate the degree of organizational integration of merging firms and the intensity of industry competition in the ready-to-eat cereal industry. Using pre- and post-merger industry data surrounding the 1993 Post-Nabisco merger, I separate merging firms' intra-organizational pricing considerations from industry pricing considerations. I find an increasing degree of joint-profit maximization of the merged entities over the first two years post-merger, eventually leading to close to full joint-profit maximization. Moreover, between 18:3 and 21:1 percent of the median markups in the industry can be attributed to cooperative industry behavior