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Forward Contracting and the Welfare Effects of Mergers

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  • Nathan H. Miller

    (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)

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    Abstract

    I extend the oligopoly model of Allaz and Vila (1993) to explore how forward contracting affects the adverse welfare consequences of horizontal mergers. I derive a welfare statistic that, within the context of the model, is free of structural parameters. The statistic allows for conclusions that generalize across different cost and demand conditions. I then show that exogenous forward contracting mitigates welfare loss but that endogenous forward contracting exacerbates welfare loss provided the relevant industry is sufficiently concentrated.

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    File URL: http://www.justice.gov/atr/public/eag/296846a.html
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    Bibliographic Info

    Paper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 201301.

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    Length: 11 pages
    Date of creation: May 2013
    Date of revision:
    Handle: RePEc:doj:eagpap:201301

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    Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530
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    Web page: http://www.justice.gov/atr/
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