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Modeling the effects of mergers in procurement

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  • Miller, Nathan H.

Abstract

In procurement settings, mergers among suppliers reduce buyers' choice sets and can harm buyers by eliminating their preferred supplier or reducing their negotiating leverage. I develop a stochastic economic model that predicts the effects of mergers based on information that commonly is available to antitrust authorities. I derive general expressions for the ex ante expected changes in price, buyer utility, and supplier profit. Each becomes tractable under certain distributional assumptions. The model predicts that average prices will increase by more than 40% due to the recently litigated acquisition of Power Reviews by Bazaarvoice, in the absence of an effective remedy.

Suggested Citation

  • Miller, Nathan H., 2014. "Modeling the effects of mergers in procurement," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 201-208.
    • Handle: RePEc:eee:indorg:v:37:y:2014:i:c:p:201-208
    DOI: 10.1016/j.ijindorg.2014.10.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Thomas Giebe & Miyu Lee, 2020. "Competitors in merger control: Shall they be merely heard or also listened to?," European Journal of Law and Economics, Springer, vol. 49(3), pages 431-453, June.
    2. Andrew Sweeting & David J. Balan & Nicholas Kreisle & Matthew T. Panhans & Devesh Raval, 2020. "Economics at the FTC: Fertilizer, Consumer Complaints, and Private Label Cereal," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(4), pages 751-781, December.
    3. Adina Claici & Daniel Coublucq & Giulio Federico & Massimo Motta & Lluís Saurí, 2016. "Recent Developments at DG Competition: 2015/2016," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(4), pages 585-611, December.
    4. Gloria Sheu & Charles Taragin, 2021. "Simulating mergers in a vertical supply chain with bargaining," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 596-632, September.
    5. Susan Athey & Mark Chicu & Malika Krishna & Ioana Marinescu, 2023. "The Year in Review: Economics at the Antitrust Division, 2022–2023," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(4), pages 525-544, December.
    6. Nathan H. Miller & Gloria Sheu, 2021. "Quantitative Methods for Evaluating the Unilateral Effects of Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 143-177, February.
    7. Dennis W. Carlton & Mark A. Israel, 2021. "Effects of the 2010 Horizontal Merger Guidelines on Merger Review: Based on Ten Years of Practical Experience," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(1), pages 213-234, February.
    8. Ronald Drennan & Helen C. Knudsen & W. Tom Whalen & Jeffrey M. Wilder, 2020. "The Year in Review: Economics at the Antitrust Division 2019–2020," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(4), pages 815-825, December.
    9. Luke M. Froeb & Russell W. Pittman & Charles S. Taragin & Steven Tschantz & Gregory J. Werden, 2018. "Economics at the Antitrust Division: 2017–2018," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(4), pages 637-651, December.
    10. Loertscher, Simon & Marx, Leslie M., 2019. "Merger review with intermediate buyer power," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    11. Luke M. Froeb & Vladimir Mares & Steven Tschantz & Charles Taragin, 2018. "The simple algebra of surplus in private values open auctions: A nested logit merger model," Economics Bulletin, AccessEcon, vol. 38(4), pages 2304-2312.

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    More about this item

    Keywords

    Procurement; Merger simulation; Scoring auctions;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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