Suppliers’ Merger and Consumers' Welfare

Eric Avenel

Ekonomia, 2012, vol. 15, issue 1, 1-21

Abstract: This article explores the consequences of a suppliers' merger on consumers' welfare when the product is sold to consumers by independent retailers competing à la Cournot. The literature shows that under the standard assumptions of private contracting and passive beliefs, there is no impact at all. I show that this unintuitive result strongly depends on the implicit assumption that suppliers have infinite capacities of production. Indeed, assuming that suppliers face a capacity constraint and that retailers hold out-of-equilibrium beliefs compatible with this constraint, I show that the merger raises the price on the final market and reduces consumers' welfare.

JEL-codes: L40 L41 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Working Paper: Suppliers' merger and consumers' welfare (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ekn:ekonom:v:15:y:2012:i:1:p:1-21

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