The Arcor/Bagley Merger and the Argentine Biscuit Market: Price Increases vs. Cost Reductions

This paper analyzes the behavior of the Argentine biscuit market during 2003-06 to find out whether any important merger occurred in October 2004 (the Arcor/Bagley merger) had any discernible market power or cost reduction effects. This paper presents an econometric demand-and-supply model in which it treats the biscuits supplied by the main producers as different products. The results show that there is an appreciable cost reduction that more than counterbalances the price increases induced by the merger. This implies that total consumers’ surplus grew as a consequence of the merger.