Who do we trust for antitrust? deconstructing structural IO

The annual volume of corporate mergers and acquisitions in the world exceeds two trillion dollars. The high level of merger and acquisition activity over the past quarter of a century has revitalised the field of Industrial Organisation (IO). For policy formulation, the antitrust authorities are increasingly relying on research in this field to understand the determinants of firm and market organisation and behaviour. Yet there has been little evaluation of whether or not the mergers that have been permitted are anti-competitive. The use of ever more complex models has made IO a high-tech highbrow area of research, but the theoretical adequacy, empirical validity and policy effectiveness are yet to be established. This paper looks at the research models and methodologies used in contemporary IO research and concludes that to lend credibility to IO studies a more robust analytical framework is needed. Further, focusing on the elegance of the solution is leading researchers towards less-important questions; while there is an unfulfilled need to look at areas which are probably more relevant from the point of view of likelihood of collusive behaviour. © IDOSI Publications, 2013.