Suppliers’ Merger and Consumers' Welfare

This article explores the consequences of a suppliers' merger on consumers' welfare when the product is sold to consumers by independent retailers competing à la Cournot. The literature shows that under the standard assumptions of private contracting and passive beliefs, there is no impact at all. I show that this unintuitive result strongly depends on the implicit assumption that suppliers have infinite capacities of production. Indeed, assuming that suppliers face a capacity constraint and that retailers hold out-of-equilibrium beliefs compatible with this constraint, I show that the merger raises the price on the final market and reduces consumers' welfare.