Pass-through rates and the price effects of mergers

We investigate the relationship in Bertrand oligopoly between the price effects of mergers absent synergies and the rates at which merger synergies are passed through to consumers in the form of lower prices. We find that the demand conditions that cause a merger to result in large price increases absent synergies also cause the pass-through rate to be high. The low estimated pass-through rate and the relatively large predicted merger effect, thus likely, were inconsistent in an important U.S. merger case.