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On the harm from mergers in input markets

Author

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  • Basso, Leonardo J.
  • Ross, Thomas W.

Abstract

This paper examines the additional social harm done by mergers in input markets that lead to higher prices, when those increases are then passed downstream through other distribution stages that are themselves imperfectly competitive. It is shown that measures of deadweight loss coming from simply looking at the (derived) upstream demand curve – as usually done in merger cases – can greatly understate the true deadweight loss generated through the distribution channel. These results have important implications for competition authorities reviewing mergers, particularly when they trade off the harm to competition (added deadweight loss) and merger-generated efficiencies.

Suggested Citation

  • Basso, Leonardo J. & Ross, Thomas W., 2019. "On the harm from mergers in input markets," Economics Letters, Elsevier, vol. 178(C), pages 70-76.
    • Handle: RePEc:eee:ecolet:v:178:y:2019:i:c:p:70-76
    DOI: 10.1016/j.econlet.2019.02.018
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    References listed on IDEAS

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    1. Boone, Jan & Müller, Wieland, 2012. "The distribution of harm in price-fixing cases," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 265-276.
    2. Leonardo J. Basso & Thomas W. Ross, 2010. "Measuring The True Harm From Price‐Fixing To Both Direct And Indirect Purchasers," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 895-927, December.
    3. FRANK VERBOVEN & THEON van DIJK, 2009. "Cartel Damages Claims And The Passing‐On Defense," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 457-491, September.
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    Cited by:

    1. Basso, Franco & Basso, Leonardo J. & Rönnqvist, Mikael & Weintraub, Andres, 2021. "Coalition formation in collaborative production and transportation with competing firms," European Journal of Operational Research, Elsevier, vol. 289(2), pages 569-581.

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    More about this item

    Keywords

    Mergers; Competition policy; Distribution chains;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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