Beyond "Horizontal" and "Vertical": The Welfare Effects of Complex Integration

Margaret Loudermilk, Gloria Sheu and Charles Taragin
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Charles Taragin: https://www.federalreserve.gov/econres/charles-s-taragin.htm

No 2023-005, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We study the welfare impacts of mergers in markets where some firms are already vertically integrated. Our model features logit Bertrand competition downstream and Nash Bargaining upstream. We numerically simulate four merger types: vertical mergers between an unintegrated retailer and an unintegrated wholesaler, downstream "horizontal" mergers between an unintegrated retailer and an integrated retailer/wholesaler, upstream "horizontal" mergers between an unintegrated wholesaler and an integrated retailer/wholesaler, and integrated mergers between two integrated retailer/wholesaler pairs. We find that mergers that have both horizontal and vertical characteristics typically harm consumers. We apply the model to the Republic/Santek merger as a real-world example.

Keywords: Bargaining models; Merger simulation; Vertical markets; Vertical mergers (search for similar items in EconPapers)
JEL-codes: L13 L40 L41 L42 (search for similar items in EconPapers)
Pages: 45 p.
Date: 2023-01-18
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2023-05

DOI: 10.17016/FEDS.2023.005

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