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Merger review with intermediate buyer power

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  • Loertscher, Simon
  • Marx, Leslie M.

Abstract

Buyer power features prominently in antitrust cases and debates, particularly as it relates to the potential for a merger among suppliers to harm a buyer. Using a Myersonian mechanism design approach, Loertscher and Marx (2019b) provide a framework for merger review for markets with buyer power, assuming that buyer power is a zero-one variable. In the present paper, we extend this analysis by treating buyer power as a continuous variable (technically, as a Ramsey weight) that ranges from zero to one. This generalization is relevant because, among other reasons, the Ramsey weight can be interpreted as a conduct parameter that can be estimated. Moreover, we establish the robustness of prior results to an alternative way of modelling merger-related cost synergies, and we show that when an acquiring firm’s choice of target is endogenous, its profit-maximizing choice depends on the buyer’s power.

Suggested Citation

  • Loertscher, Simon & Marx, Leslie M., 2019. "Merger review with intermediate buyer power," International Journal of Industrial Organization, Elsevier, vol. 67(C).
  • Handle: RePEc:eee:indorg:v:67:y:2019:i:c:s0167718719300530
    DOI: 10.1016/j.ijindorg.2019.102531
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    References listed on IDEAS

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    Cited by:

    1. Chambolle, Claire & Christin, Clémence & Molina, Hugo, 2023. "Buyer power and exclusion: A progress report," International Journal of Industrial Organization, Elsevier, vol. 90(C).

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    More about this item

    Keywords

    Unilateral effects; Incomplete information IO; Triple IO;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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