Upstream horizontal mergers involving a vertically integrated firm
Journal of Economics, 2020, vol. 130, issue 1, No 3, 67-83
Abstract We study upstream horizontal mergers when one of the merging parties is vertically integrated. Under observable contracting in the pre-merger case, we show that such type of mergers always harm consumers. However, under unobservable contracting in the pre-merger case, the input price may decrease and consumer surplus may increase as a result of the merger even in the absence of exogenous cost-synergies between merging firms. A necessary condition for this finding is that the unintegrated downstream firm is more cost-efficient than the downstream division of the integrated firm.
Keywords: Vertical relations; Horizontal mergers; Vertically integrated firm; Consumer surplus (search for similar items in EconPapers)
JEL-codes: L11 L13 L41 L42 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:130:y:2020:i:1:d:10.1007_s00712-019-00677-5
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