The mode of competition: where to start and when you stop in merger analysis

“The best way to begin an economic analysis is to ask a relevant question. In a merger analysis the relevant question is: will the post-merger new entity have the ability and the incentive to exert a higher market power? But which analyses are best suited to answer these questions? This note argues that the best way to make this call is to understand first how firms compete in the market, something economists refer to as the “mode of competition”. In the context of merger control, the identification of the mode of competition can improve both the identification of the relevant antitrust economic question(s) and of the most adequate economic analyses to answer the question(s).”