In horizontal mergers, concentration is often measured with the Hirschmann- Herfindahl Index (HHI). This index yields the price-cost margins in Cournot competition. In many modern merger cases, both buyers and sellers have market power, and indeed, the buyers and sellers may be the same set of firms. In such cases, the HHI is inapplicable. We develop an alternative theory that has similar data requirements as the HHI, applies to intermediate good industries with market power on both sides, and specializes to the HHI when buyers have no market power and sellers have constant marginal cost. Our analysis permits consideration of vertical mergers that change the net demand. The analysis is applied to the merger of the California gasoline refining and retail assets of Exxon and Mobil.
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Paper provided by UBC Department of Economics in its series UBC Departmental Archives with number
00-01.
Find related papers by JEL classification: L40 - Industrial Organization - - Antitrust Issues and Policies - - - General L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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