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Vertical merger, collusion, and disruptive buyers

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  • Nocke, Volker
  • White, Lucy

Abstract

In a repeated game setting of a vertically related industry, we study the collusive effects of vertical mergers. We show that any vertical merger facilitates upstream collusion, no matter how large (in terms of capacity or size of product portfolio) the integrated downstream buyer. But a vertical merger with a larger buyer helps more to facilitate upstream collusion than a similar merger with a smaller buyer. This formalizes the idea expressed in the U.S. and EU Non-Horizontal Merger Guidelines that some downstream buyers may be more "disruptive" of collusive schemes than others.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 28 (2010)
Issue (Month): 4 (July)
Pages: 350-354

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Handle: RePEc:eee:indorg:v:28:y:2010:i:4:p:350-354

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Web page: http://www.elsevier.com/locate/inca/505551

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Keywords: Vertical merger Collusion Disruptive buyer Merger guidelines Repeated game;

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References

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  1. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  2. Mailath, George J. & Nocke, Volker & White, Lucy, 2004. "When the Punishment Must Fit the Crime: Remarks on the Failure of Simple Penal Codes in Extensive-Form Games," CEPR Discussion Papers 4793, C.E.P.R. Discussion Papers.
  3. Nocke, Volker & White, Lucy, 2010. "Vertical Merger, Collusion, and Disruptive Buyers," CEPR Discussion Papers 7722, C.E.P.R. Discussion Papers.
  4. Volker Nocke & Lucy White, 2003. "Do Vertical Mergers Facilitate Upstream Collusion?," PIER Working Paper Archive 03-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  5. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
  6. Kühn, Kai-Uwe & Rimler, Michael S, 2006. "The Comparative Statics of Collusion Models," CEPR Discussion Papers 5742, C.E.P.R. Discussion Papers.
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Cited by:
  1. Mariana Cunha & Paula Sarmento, 2012. "Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability," FEP Working Papers 465, Universidade do Porto, Faculdade de Economia do Porto.
  2. Nocke, Volker & White, Lucy, 2010. "Vertical merger, collusion, and disruptive buyers," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 28(4), pages 350-354, July.

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