Mix‐and‐match divestitures and merger harm

Simon Loertscher and Leslie Marx

The Japanese Economic Review, 2019, vol. 70, issue 3, 346-366

Abstract: We consider the effects of a merger combined with a divestiture that mixes and matches the assets of the two pre‐merger suppliers into one higher‐cost and one lower‐cost post‐merger supplier. Such mix‐and‐match transactions leave the number of suppliers in a market unchanged but, as we show, can be procompetitive or anticompetitive depending on whether buyers are powerful and on the extent of outside competition. A powerful buyer can benefit from a divestiture that creates a lower‐cost supplier, even if it causes the second‐lowest cost to increase. In contrast, a buyer without power is always harmed by a weakening of the competitive constraint on the lowest‐cost supplier.

Date: 2019
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https://doi.org/10.1111/jere.12237

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Journal Article: Mix-and-Match Divestitures and Merger Harm (2019)
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