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Upstream Horizontal Mergers, Bargaining, Vertical Contracts

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  • Chrysovalantou Milliou

    ()

  • Emmanuel Petrakis

    ()

Abstract

Contrary to the seminal paper of Horn and Wolinsky (1988), we demonstrate that upstream firms, which sell their products to competing downstream firms, do not always have incentives to merge horizontally. In particular, we show that when bargaining takes place over two-part tariffs, and not over wholesale prices, upstream firms prefer to act as independent suppliers rather than as a monopolist supplier. Moreover, we show that horizontal mergers can be procompetitive, even in the absence of efficiency gains.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we051507.

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Date of creation: Mar 2005
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Handle: RePEc:cte:werepe:we051507

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References

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  1. Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 299-308, Autumn.
  2. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier, Elsevier.
  3. Inderst, Roman & Wey, Christian, 2001. "Bargaining, Mergers and Technology Choice in Bilaterally Oligopolistic Industries," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2981, C.E.P.R. Discussion Papers.
  4. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 6(3), pages 397-422, July.
  5. Horn, H. & Wolinsky, A., 1988. "Bilateral Monopolies And Incentives For Merger," Papers, Stockholm - International Economic Studies 410, Stockholm - International Economic Studies.
  6. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, American Economic Association, vol. 77(5), pages 927-40, December.
  7. Emmanuel Petrakis & Chrysovalantou Miliou & Nikos Vettas, 2009. "(In)efficient trading forms in competing vertical chains," Working Papers, University of Crete, Department of Economics 0916, University of Crete, Department of Economics.
  8. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  9. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(441), pages 418-30, March.
  10. Robert C. Marshall & Antonio Merlo, 2004. "Pattern Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(1), pages 239-255, 02.
  11. Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, Elsevier, vol. 49(3), pages 717-743, April.
  12. Gal-Or, Esther, 1991. "Duopolistic vertical restraints," European Economic Review, Elsevier, Elsevier, vol. 35(6), pages 1237-1253, August.
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Cited by:
  1. Lommerud, Kjell Erik & Olsen, Trond E. & Straume, Odd Rune, 2005. "Access regulation and cross-border mergers: Is international coordination beneficial?," Discussion Papers, Department of Business and Management Science, Norwegian School of Economics 2005/8, Department of Business and Management Science, Norwegian School of Economics.
  2. Lommerud, Kjell Erik & Olsen, Trond E. & Straume, Odd Rune, 2006. "Cross border mergers and strategic trade policy with two-part taxation: is international policy coordination beneficial?," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-24, Social Science Research Center Berlin (WZB).

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