Portfolio Analysis in European Merger Control: An Economic Analysis
AbstractThe year 1997 saw the emergence of a new game theory in European merger control called the 'portfolio power theory'. The European Commission argues that the holder of a comprehensive portfolio of brands may obtain a stronger position vis-a-vis its customers, and can therefore more easily impose restrictions, such as full-line forcing. The objective of this paper is to analyse this argument from a theoretical point of view. We show that tie-in sales allow the incumbent to deter entry and to eliminate the retailer's rent when the downstream sector is monopolised. When the producers compete directly for consumers, the second brand provides a new predation tool. This allows the incumbent to deter entry more easily, but it can also limit price distortion. In both cases, the welfare impact is not clear-cut.
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 02/046.
Length: 34 pages
Date of creation: Feb 2002
Date of revision:
full-line forcing; entry deterrence; predatory pricing;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-11-03 (All new papers)
- NEP-COM-2003-11-03 (Industrial Competition)
- NEP-EEC-2003-11-03 (European Economics)
- NEP-FIN-2003-11-03 (Finance)
- NEP-MFD-2003-11-03 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Shaffer, Greg, 1991. "Capturing Strategic Rent: Full-Line Forcing, Brand Discounts, Aggregate Rebates, and Maximum Resale Price Maintenance," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 557-75, September.
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- Michael D. Whinston, 1989.
"Tying, Foreclosure, and Exclusion,"
NBER Working Papers
2995, National Bureau of Economic Research, Inc.
- Margaret E. Slade, 1998. "The Leverage Theory of Tying Revisited: Evidence from Newspaper Advertising," Southern Economic Journal, Southern Economic Association, vol. 65(2), pages 204-222, October.
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