Merger review with intermediate buyer power

Simon Loertscher and Leslie M. Marx

International Journal of Industrial Organization, 2019, vol. 67, issue C

Abstract: Buyer power features prominently in antitrust cases and debates, particularly as it relates to the potential for a merger among suppliers to harm a buyer. Using a Myersonian mechanism design approach, Loertscher and Marx (2019b) provide a framework for merger review for markets with buyer power, assuming that buyer power is a zero-one variable. In the present paper, we extend this analysis by treating buyer power as a continuous variable (technically, as a Ramsey weight) that ranges from zero to one. This generalization is relevant because, among other reasons, the Ramsey weight can be interpreted as a conduct parameter that can be estimated. Moreover, we establish the robustness of prior results to an alternative way of modelling merger-related cost synergies, and we show that when an acquiring firm’s choice of target is endogenous, its profit-maximizing choice depends on the buyer’s power.

Keywords: Unilateral effects; Incomplete information IO; Triple IO (search for similar items in EconPapers)
JEL-codes: D44 D82 L41 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:67:y:2019:i:c:s0167718719300530

DOI: 10.1016/j.ijindorg.2019.102531

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