Horizontal mergers in the presence of vertical relationships


Ghosh, Arghya ; Morita, Hodaka ; Wang, Chengsi


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URL: https://ub-madoc.bib.uni-mannheim.de/37301
URN: urn:nbn:de:bsz:180-madoc-373017
Document Type: Working paper
Year of publication: 2014
The title of a journal, publication series: Working Paper Series
Volume: 14-27
Place of publication: Mannheim
Publication language: English
Institution: School of Law and Economics > VWL, Industrieökonomik, Wettbewerbspolitik u. Regulierung (Peitz 2007-)
MADOC publication series: Department of Economics > Working Paper Series
Subject: 330 Economics
Classification: JEL: L13 , L41 , L42,
Keywords (English): merger , successive oligopoly , welfare , reallocation , rationalization
Abstract: We study welfare effects of horizontal mergers under a successive oligopoly model and find that downstream mergers can increase welfare if they reduce input prices. The lower input price shifts some input production from cost- inefficient upstream firms to cost-efficient ones. Also, the lower input price makes upstream entry less attractive, reduces the number of upstream entrants, and decreases their average costs in the presence of fixed entry costs. We identity necessary and sufficient conditions for a reduction in input prices and welfare-improving horizontal mergers under a general demand function. Qualitative nature of our findings remains unchanged for upstream mergers.

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Ghosh, Arghya ; Morita, Hodaka ; Wang, Chengsi (2014) Horizontal mergers in the presence of vertical relationships. Open Access Working Paper Series Mannheim 14-27 [Working paper]
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