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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

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7722.

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Date of creation: Mar 2010
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Handle: RePEc:cpr:ceprdp:7722

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Related research

Keywords: antitrust; collusion; merger guidelines; vertical integration; vertical merger;

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References

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  1. 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.
  2. Kühn, Kai-Uwe & Rimler, Michael S, 2006. "The Comparative Statics of Collusion Models," CEPR Discussion Papers 5742, C.E.P.R. Discussion Papers.
  3. Nocke, Volker & White, Lucy, 2010. "Vertical merger, collusion, and disruptive buyers," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 350-354, July.
  4. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  5. George J. Mailath & Volker Nocke & Lucy White, 2004. "When the Punishment Must Fit the Crime: Remarks on the Failure of Simple Penal Codes in Extensive-Form Games," PIER Working Paper Archive 04-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Compte, Olivier & Jenny, Frederic & Rey, Patrick, 2002. "Capacity constraints, mergers and collusion," European Economic Review, Elsevier, vol. 46(1), pages 1-29, January.
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Cited by:
  1. Nocke, Volker & White, Lucy, 2010. "Vertical merger, collusion, and disruptive buyers," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 350-354, July.
  2. Mariana Cunha & Paula Sarmento, 2014. "Does Vertical Integration Promote Downstream Incomplete Collusion? An Evaluation of Static and Dynamic Stability," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 1-38, March.

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