Downstream merger and welfare in a bilateral oligopoly

George Symeonidis ()

Economics Discussion Papers from University of Essex, Department of Economics

Abstract: I analyse the effects of a downstream merger in a differentiated oligopoly when there is bargaining between downstream firms and upstream agents (firms or unions). Bargaining outcomes can be observable or unobservable by rivals. When competition is in quantities, upstream agents are independent and bargaining is over a uniform input price, a merger between downstream firms may raise consumer surplus and overall welfare. However, when competition is in prices or the upstream agents are not independent or bargaining is over a two-part tariff or bargaining covers both the input price and the level of output, the standard welfare results are restored: a downstream merger always reduces consumer surplus and overall welfare.

New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
Date: 2009-07-13
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