Post-Merger Price Dynamics Matter, So Why Do Merger Retrospectives Ignore Them?

The price effect of past mergers has been extensively researched over the last two decades. The overwhelming majority of these studies pool post-merger data to estimate the average price effect of a merger. Merger guidelines agree that mergers should be approved if market dynamics, such as entry, eliminate negative welfare effects. However, pooled post-merger data ignore key information about price dynamics and are unable to identify if post-merger prices eventually revert to pre-merger levels or drift away. We provide evidence, from a meta-analysis of previous works, and a set of Monte Carlo experiments, on how serious this problem is. We also show the conditions where pooled data studies make an erroneous conclusion about the merger