Horizontal mergers in the presence of vertical relationships

Arghya Ghosh, Hodaka Morita () and Chengsi Wang

MPRA Paper from University Library of Munich, Germany

Abstract: We study welfare effects of horizontal mergers under a successive oligopoly model and find that downstream mergers can increase welfare if they reduce input prices. The lower input price shifts some input production from cost-inefficient upstream firms to cost-efficient ones. Also, the lower input price makes upstream entry less attractive, reduces the number of upstream entrants, and decreases their average costs in the presence of fixed entry costs. We identity necessary and sufficient conditions for a reduction in input prices and welfare-improving horizontal mergers under a general demand function. Qualitative nature of our findings remains unchanged for upstream mergers.

Keywords: merger; successive oligopoly; welfare; reallocation; rationalization. (search for similar items in EconPapers)
JEL-codes: L1 L4 L5 (search for similar items in EconPapers)
Date: 2014-11-27
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/60275/1/MPRA_paper_60275.pdf original version (application/pdf)

Related works:
Working Paper: Horizontal mergers in the presence of vertical relationships (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:60275

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().