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Horizontal mergers and successive oligopoly

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Author Info

  • Steffen Ziss

    ()
    (Wilfrid Laurier University)

Abstract

This paper considers a successive oligopoly setting in which a set of upstream firms sell output non-exclusively to a group of downstream firms using a linear tariff. If the concavity of retail demand is constant then the profitability of horizontal merger at either the upstream or the downstream stage is shown to depend on the number of firms in the stage experiencing the merger and not on the number of firms in the other stage. Furthermore, the profitability of merger at either stage is the same as the profitability of merger amongst a set of vertically integrated firms in a setting in which all firms are vertically integrated. Finally, mergers at either stage are shown to reduce the sum of producer and consumer surplus. Moreover the negative effects of merger on surplus are unambiguously increased by increases in concentration in the merging stage and ambiguously affected by increases in concentration in the non-merging stage.

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File URL: http://www.wlu.ca/documents/6984/mersucol.pdf
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Bibliographic Info

Paper provided by Wilfrid Laurier University, Department of Economics in its series Working Papers with number eg0041.

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Date of creation: 2005
Date of revision: 2005
Handle: RePEc:wlu:wpaper:eg0041

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Related research

Keywords: horizontal mergers; double-marginalization; successive oligopoly;

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Cited by:
  1. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 31-52, March.
  2. Marie-Laure Allain & Saïd Souam, 2004. "Concentration horizontale et relations verticales," Working Papers hal-00242914, HAL.
  3. repec:hal:wpaper:hal-00143920 is not listed on IDEAS
  4. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Experimental Economics, Springer, vol. 7(1), pages 31-52, March.
  5. Zhiyong Yao & Wen Zhou, 2011. "Endogenous Merger Waves in Vertically Related Industries," Working Papers 11-34, NET Institute.

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