#### 6.2. Sample Markets

We make separate analyses for three markets. The first is household flavor seasonings (hereafter, seasonings), which includes about 3,000 items. The largest producer, Ajinomoto, acquired 33.4 percent of the share of the third largest, Yamaki, in 2007.

The second is sugar, with about 850 items. Three sugar refineries, Shin Mitsui Seito (the largest in the market), Taito, and KS, merged in 2005 to become Mitsui Seito (Mitsui Sugar).

The third is instant noodles including cup noodles (hereafter, noodles). Nisshin, No. 2 in pack noodles and No. 1 in cup noodles, acquired Myojo in 2006. Myojo became a wholly owned subsidiary of Nisshin and, two years later, a joint holding company, Nisshin Foods Holdings, was established with both Nisshin and Myojo as its wholly owned subsidiaries.

#### 6.3. Data

The data, purchased from private data companies, were gathered at more than 600 stores at point of sales (POS). It is aggregated into nine regions (e.g., Hokkaido, Tohoku, and Tokyo Metropolitan). The data is monthly basically from two years before the merger to two years after the merger. It includes the data on both the value and quantity of sales for each item. By dividing the value by quantity, we obtained the price data.

#### 6.4. Results

The results are shown in Table 7. To save space, we suppressed the estimated results of brand, region, and month effects ( $ \hat{\alpha}_{i,j} $ and $ \hat{D}_{m} $ ) and only show the estimated coefficients, $ \hat{\beta}_{1} $ and $ \hat{\beta}_{2} $ . For more details, see Arai (2011).

$ \hat{\beta}_{1} $ is the estimated effect of the merger (or acquisition) on the market price on average. It is positive and significant for seasonings and sugar. For noodles, it is negative but small; that is, it decreased the price only by 0.23 percent. By contrast, the merger increased the price by more than 5 percent in the sugar market – a substantial increase. The price increase was smaller but still significant in the seasonings market, at 0.16 percent.

$ \hat{\beta}_{2} $ shows how much the prices of merging firms' items increased relatively to the average market price. It is positive and significant for all the three products. Again, the effect is strongest in the sugar market: here, after the merger, the average price increased by 5.28 percent and, in addition, the prices of the merging firms increased by 3.84 percent; therefore, the latter increased by 9.12 percent in total after the merger. By contrast, the effect is again small in the noodles market. Here, the merging firms increased their prices relative to the market average by 0.23 percent. Together with the effect the average market price went down by 0.23 percent, this implies that the merging firms did not change their prices despite the general decline in the market prices.

In view of the theoretical prediction from oligopoly models discussed in Section 2, these results suggest that the marginal cost of the merged firm never decreased sufficiently to have the firm lower its product price. Particularly in the case of sugar and, to a lesser extent, seasonings, the consumers' surplus must have been hurt as a result.

#### 6.5. Case Study: Seasonings

In the seasonings case, the two partners, Ajinomoto and Yamaki, remained as separate