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Upstream Horizontal Mergers and Efficiency Gains

Chrysovalantou Milliou () and Apostolis Pavlou

No 2748, CESifo Working Paper Series from CESifo

Abstract: We study upstream horizontal mergers and their potential efficiency gains. We show that an upstream horizontal merger can give rise to two efficiency-enhancing effects when firms trade through two-part tariffs. It increases R&D investments and decreases wholesale prices when downstream competition is not too strong. Examining whether the merger’s potential efficiency gains can overcome its anti-competitive effects in terms of welfare, we show that when firms merge usually both of the above mentioned efficiencies are realized and they are passed on to consumers. This holds to a lesser extend when firms trade through linear contracts.

Keywords: horizontal mergers; vertical relations; efficiency gains; two-part tariffs; merger policy (search for similar items in EconPapers)
JEL-codes: L22 L41 L42 (search for similar items in EconPapers)
Date: 2009
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