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Vertical Mergers in Multi-product Industries and Edgeworth's Paradox of Taxation

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  • Salinger, Michael A

Abstract

When a two-product monopolist merges with one of its suppliers, thus eliminating the double marginalization for one of its goods, three qualitative effects on downstream prices can result. The monopolist might (1) lower both prices, (2) lower the price of the good for which the double marginalization is eliminated and raise the price of the other good, or (3) raise both prices. Since some and even all prices can increase, mergers of successive monopolists in multiproduct industries do not necessarily improve welfare. This result differs from the single product case, in which such mergers necessarily increase welfare. Copyright 1991 by Blackwell Publishing Ltd.

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  • Salinger, Michael A, 1991. "Vertical Mergers in Multi-product Industries and Edgeworth's Paradox of Taxation," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 545-556, September.
  • Handle: RePEc:bla:jindec:v:39:y:1991:i:5:p:545-56
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    Cited by:

    1. Jay Pil Choi, 2008. "MERGERS WITH BUNDLING IN COMPLEMENTARY MARKETS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 553-577, September.
    2. Robert A. Ritz, 2014. "A new version of Edgeworth's taxation paradox," Oxford Economic Papers, Oxford University Press, vol. 66(1), pages 209-226, January.
    3. Dong Chen & David Waterman, 2007. "Vertical Ownership, Program Network Carriage, and Tier Positioning in Cable Television: An Empirical Study," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(3), pages 227-251, May.
    4. Michael Salinger, 2011. "Discussion of Papers by Bruce Owen and Christopher Yoo," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(4), pages 435-440, June.
    5. Suzuki, Ayako, 2009. "Market foreclosure and vertical merger: A case study of the vertical merger between Turner Broadcasting and Time Warner," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 532-543, July.
    6. Emanuele Bacchiega & Olivier Bonroy, 2015. "On the benefits of contractual inefficiency in quality-differentiated markets," Oxford Economic Papers, Oxford University Press, vol. 67(3), pages 846-863.
    7. Choi, Jay Pil & Yi, Sang-Seung, 2016. "An equilibrium model of investment-reducing vertical integration," Research in Economics, Elsevier, vol. 70(4), pages 659-676.

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