Evaluating Partial Divestitures When Vertical Relations are Important
Pedro Pereira and
Tiago Ribeiro ()
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Tiago Ribeiro: Indera - Estudos Económicos, Lda
Review of Industrial Organization, 2018, vol. 53, issue 2, 321-345
Abstract We use the approach of the partial-ownership literature to model the partial sale of a firm’s productive capacity. The framework is applied to the Portuguese outdoor advertising industry. We develop and estimate—with the use product-level data—a differentiated products equilibrium model that: (1) includes a wholesale and a retail level; and (2) allows firms to have several shareholders. The estimated equilibrium model is used to perform several counterfactual exercises that involve the sale to various buyers of parts of a firm’s productive capacity—with and without synergies—instead of the sale of the whole firm to a single buyer, as is usually considered in the literature. The results show that the impact of a divestiture depends on the identity of the buyers and the amount of capacity sold. More interestingly, the results also show that a divestiture may have a net anti-competitive impact.
Keywords: Vertical relations; Merger simulation; Partial acquisitions (search for similar items in EconPapers)
JEL-codes: K21 L13 (search for similar items in EconPapers)
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