Keywords: mergers, antitrust, multimarket oligopoly
When antitrust agencies screen horizontal mergers, the exercise of establishing relevant market definition is done in an effort to try to isolate and better estimate both pro and anticompetitive effects of a potential merger under rule of reason. The present paper focuses on the identifying merger effects that may not be taken into account when multimarket dynamics are present. Firms that interact within multiple markets may have incentives to either increase or decrease production in adjacent markets to those where the mergers is happening depending on the nature of their cost structure. Once those results are derived, a proposed empirical application is developed in which the U.S. airline industry serve as the subject of investigation of those effects.