Forward Contracting and the Welfare Effects of Mergers
AbstractI 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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Bibliographic InfoPaper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 201301.
Length: 11 pages
Date of creation: May 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
- NEP-COM-2013-05-24 (Industrial Competition)
- NEP-IND-2013-05-24 (Industrial Organization)
- NEP-REG-2013-05-24 (Regulation)
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