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Downstream merger and welfare in a bilateral oligopoly

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Author Info
George Symeonidis ()

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Abstract

I analyse the effects of a downstream merger in a differentiated oligopoly when there is bargaining between downstream firms and upstream agents (firms or unions). Bargaining outcomes can be observable or unobservable by rivals. When competition is in quantities, upstream agents are independent and bargaining is over a uniform input price, a merger between downstream firms may raise consumer surplus and overall welfare. However, when competition is in prices or the upstream agents are not independent or bargaining is over a two-part tariff or bargaining covers both the input price and the level of output, the standard welfare results are restored: a downstream merger always reduces consumer surplus and overall welfare.

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Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 671.

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Date of creation: 13 Jul 2009
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Handle: RePEc:esx:essedp:671

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