IDEAS home Printed from https://ideas.repec.org/p/wlu/wpaper/eg0041.html
   My bibliography  Save this paper

Horizontal mergers and successive oligopoly

Author

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.

Suggested Citation

  • Steffen Ziss, 2005. "Horizontal mergers and successive oligopoly," Working Papers eg0041, Wilfrid Laurier University, Department of Economics, revised 2005.
    • Handle: RePEc:wlu:wpaper:eg0041
    as

    Download full text from publisher

    File URL: https://web.wlu.ca/repec/Working%20papers/2004/mersucol.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ziss, Steffen, 2001. "Horizontal mergers and delegation," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 471-492, March.
    2. Cheung, Francis K., 1992. "Two remarks on the equilibrium analysis of horizontal merger," Economics Letters, Elsevier, vol. 40(1), pages 119-123, September.
    3. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    4. Greenhut, M L & Ohta, H, 1976. "Related Market Conditions and Interindustrial Mergers," American Economic Review, American Economic Association, vol. 66(3), pages 267-277, June.
    5. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-489, March.
    6. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    7. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
    8. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    9. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-430, March.
    10. Daughety, Andrew F, 1990. "Beneficial Concentration," American Economic Review, American Economic Association, vol. 80(5), pages 1231-1237, December.
    11. Neil Wrigley, 2001. "The consolidation wave in U.S. food retailing: A European perspective," Agribusiness, John Wiley & Sons, Ltd., vol. 17(4), pages 489-513.
    12. Gonzalez-Maestre, Miguel & Lopez-Cunat, Javier, 2001. "Delegation and mergers in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1263-1279, September.
    13. Fauli-Oller, Ramon, 1997. "On merger profitability in a Cournot setting," Economics Letters, Elsevier, vol. 54(1), pages 75-79, January.
    14. Gaudet, Gerard & Salant, Stephen W, 1991. "Increasing the Profits of a Subset of Firms in Oligopoly Models with Strategic Substitutes," American Economic Review, American Economic Association, vol. 81(3), pages 658-665, June.
    15. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-187, June.
    16. Morton I. Kamien & Israel Zang, 1990. "The Limits of Monopolization Through Acquisition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 465-499.
    17. Paul Dobson & Michael Waterson, 1999. "Retailer power: recent developments and policy implications," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 14(28), pages 134-164.
    18. Michael Waterson, 1980. "Price-Cost Margins and Successive Market Power," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(1), pages 135-150.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marie-Laure Allain & Saïd Souam, 2004. "Concentration horizontale et relations verticales," Working Papers hal-00242914, HAL.
    2. Ramon Fauli-Oller & Borja Mesa-Sánchez, 2015. "Losses from Horizontal Merger: an Extension to a Successive Oligopoly Model with Product Differentiation," Manchester School, University of Manchester, vol. 83(5), pages 604-621, September.
    3. Zhiyong Yao & Wen Zhou, 2011. "Endogenous Merger Waves in Vertically Related Industries," Working Papers 11-34, NET Institute.
    4. 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.
    5. Tomomichi Mizuno, 2009. "Divisionalization And Horizontal Mergers In A Vertical Relationship," Manchester School, University of Manchester, vol. 77(3), pages 317-336, June.
    6. Arghya Ghosh & Hodaka Morita & Chengsi Wang, 2022. "Welfare Improving Horizontal Mergers in Successive Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 70(1), pages 89-118, March.
    7. Gjermund Nese & Odd Straume, 2007. "Industry Concentration and Strategic Trade Policy in Successive Oligopoly," Experimental Economics, Springer;Economic Science Association, vol. 7(1), pages 31-52, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ziss, Steffen, 2001. "Horizontal mergers and delegation," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 471-492, March.
    2. Marie-Laure Allain & Saïd Souam, 2004. "Concentration horizontale et relations verticales," Working Papers hal-00242914, HAL.
    3. Michael Higl & Peter Welzel, 2005. "Intra-firm Coordination and Horizontal Merger," Discussion Paper Series 269, Universitaet Augsburg, Institute for Economics.
    4. Ziss, Steffen, 2007. "Hierarchies, intra-firm competition and mergers," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 237-260, April.
    5. Inderst, Roman & Wey, Christian, 2003. "Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 1-19, Spring.
    6. Sergio Currarini & Marco A. Marini, 2015. "Coalitional Approaches to Collusive Agreements in Oligopoly Games," Manchester School, University of Manchester, vol. 83(3), pages 253-287, June.
    7. Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, vol. 49(3), pages 717-743, April.
    8. Roman Inderst & Christian Wey, 2000. "Market Structure, Bargaining, and Technology Choice," CIG Working Papers FS IV 00-12, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    9. R. Cellini & L. Lambertini, 2003. "Capital Accumulation and Horizontal Mergers in Differential Oligopoly Games," Working Papers 477, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Lommerud, Kjell Erik & Sorgard, Lars, 1997. "Merger and product range rivalry," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 21-42, November.
    11. Amir, Rabah & Diamantoudi, Effrosyni & Xue, Licun, 2009. "Merger performance under uncertain efficiency gains," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 264-273, March.
    12. Justin P. Johnson & Andrew Rhodes, 2021. "Multiproduct mergers and quality competition," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 633-661, September.
    13. Heywood, John S. & McGinty, Matthew, 2011. "Cross-border mergers in a mixed oligopoly," Economic Modelling, Elsevier, vol. 28(1-2), pages 382-389, January.
    14. Ioannis N. Pinopoulos, 2020. "Upstream horizontal mergers involving a vertically integrated firm," Journal of Economics, Springer, vol. 130(1), pages 67-83, June.
    15. Can Erutku & Patrick de Lamirande, 2009. "Merging with a buyer group member," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 481-490.
    16. Emilie Dargaud, 2007. "Active firms in horizontal mergers and cartel stability," Post-Print halshs-00164900, HAL.
    17. Emilie Dargaud, 2005. "Monopolization through acquisitions in a differentiated product industry," Working Papers 0507, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    18. Ghosh, Arghya & Morita, Hodaka & Wang, Chengsi, 2014. "Horizontal mergers in the presence of vertical relationships," MPRA Paper 60275, University Library of Munich, Germany.
    19. Mialon, Sue H., 2008. "Efficient horizontal mergers: The effects of internal capital reallocation and organizational form," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 861-877, July.
    20. Emilie Dargaud, 2012. "Endogenous mergers and maximal concentration: a note," Economics Bulletin, AccessEcon, vol. 32(1), pages 137-146.

    More about this item

    Keywords

    horizontal mergers; double-marginalization; successive oligopoly;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wlu:wpaper:eg0041. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Glen Stewart (email available below). General contact details of provider: https://edirc.repec.org/data/sbwluca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.