Is the Whole Greater than the Sum of Its Parts? Pricing Pressure Indices for Mergers of Vertically Integrated Firms

Michael Trost ()
Additional contact information
Michael Trost: University of Hohenheim

Review of Industrial Organization, 2021, vol. 58, issue 2, No 1, 235-262

Abstract: Abstract The paper analyzes gross upward pricing pressure indices— $$\texttt {iGUPPI}$$ iGUPPI —to assess the anti-competitive effects of mergers between vertically integrated firms where independent rivals are active in the downstream market. Such indices could be used, for example, to screen mergers between mobile network operators that compete with mobile virtual network operators in the downstream retail market. It is shown that the $$\texttt {iGUPPI}$$ iGUPPI for the downstream divisions of the merging firms corresponds to the sum of two well-known upward pricing pressure indices: the $$\texttt {GUPPI}$$ GUPPI concept of Salop and Moresi (Georget Law J, 2009), and the $$\texttt {vGUPPI}$$ vGUPPI concept of Moresi and Salop (Antitrust Law J 79(1):185–214, 2013). However, this simple decomposition does not hold for their upstream divisions a priori. Here, additional effects that are not included in the two concepts arise. Further assumptions with respect to the price reactions of the downstream divisions to increases in the input prices are imposed so that the $$\texttt {iGUPPI}$$ iGUPPI for the upstream divisions is decomposable into an upstream market version of the $$\texttt {GUPPI}$$ GUPPI and the $$\texttt {vGUPPI}$$ vGUPPI .

Keywords: Pricing pressure indices; Vertically integrated firms; Mergers; UPP; GUPPI; vGUPPI (search for similar items in EconPapers)
JEL-codes: L41 L42 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11151-020-09747-1 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:revind:v:58:y:2021:i:2:d:10.1007_s11151-020-09747-1

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11151/PS2

DOI: 10.1007/s11151-020-09747-1

Access Statistics for this article

Review of Industrial Organization is currently edited by L.J. White

More articles in Review of Industrial Organization from Springer, The Industrial Organization Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().