An empirical analysis of competitive effects of the Homeplus-Homever merger

This paper analyzes the competitive effects of the horizontal merger between two superstores in Korea, Home plus and Homever. We calculated a price index covering a large number of products for individual Home plus stores in different regions, and conducted a regression analysis to evaluate the likely competitive effects of the proposed merger. We found that the maximum difference in price index across 51 Home plus stroes is less than 2.5%, and the price indexes of these stores are independent of the degree of concentration in the region where each store is located. We also found that the presence of Homever stores has no significant effect on the price index of the nearby Home plus stores, while the existence of Emart stores and tranditional markets has some negative effect. These results imply that the merger is not likely to lead to the elevation of prices. We found similar results in a regression analysis using cross-section data.