No 225 The Effect of Retail Mergers on Prices and Variety: An Ex-post Evaluation Elena Argentesi, Paolo Buccirossi, Roberto Cervone, Tomaso Duso, Alessia Marrazzo June 2016 IMPRINT DICE DISCUSSION PAPER Published by düsseldorf university press (dup) on behalf of Heinrich‐Heine‐Universität Düsseldorf, Faculty of Economics, Düsseldorf Institute for Competition Economics (DICE), Universitätsstraße 1, 40225 Düsseldorf, Germany www.dice.hhu.de Editor: Prof. Dr. Hans‐Theo Normann Düsseldorf Institute for Competition Economics (DICE) Phone: +49(0) 211‐81‐15125, e‐mail:
[email protected] DICE DISCUSSION PAPER All rights reserved. Düsseldorf, Germany, 2016 ISSN 2190‐9938 (online) – ISBN 978‐3‐86304‐224‐0 The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors’ own opinions and do not necessarily reflect those of the editor. The Effect of Retail Mergers on Prices and Variety: An Ex-post Evaluation∗ Elena Argentesi,y Paolo Buccirossi,z Roberto Cervone,z Tomaso Duso,§ Alessia Marrazzo z June 2016 Abstract Unlike most retrospective merger studies that only focus on price effects, we also estimate the impact of a merger on product variety. We use an original dataset on Dutch supermarkets to assess the effect of a merger that was conditionally approved by the Dutch Competition Authority (ACM) on prices and the depth of assortment. We find that the merger did not affect prices but it led the merging parties to decrease the depth of their assortment, thereby reducing consumer choice. This effect is mainly driven by a reduction in variety for stores that were not re-branded after the merger, suggesting that the merging firms reposition their product offerings in order to avoid cannibalization.