25 June 2006

Lost in Translation: The use and abuse of diversion ratios in unilateral effects analysis

It is widely recognised that diversion ratios can provide a useful tool when analysing the unilateral effects of a merger. […] In principle, a reliable diversion ratio approach dispenses with any need to measure the relevant market because it measures directly the extent of the competitive constraints that disappear due to the merger. However, there are many pitfalls in using diversion ratios to make predictions of the impact of a merger on competition.

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