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Evaluating horizontal mergers in the presence of price promotions

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  • Maxim Sinitsyn

    (University of California, San Diego)

Abstract

In this paper, I investigate the impact of a horizontal merger between firms that use price promotions. I find that after the merger, the merged firms increase their prices, but coordinate the promotions by never discounting their products simultaneously. The non-merged firm responds with a more aggressive pricing strategy, offering deeper and more frequent discounts. The effects of a merger on the firms’ profits and the consumer surplus are very small relative to the case with no promotions. These conclusions are not affected by the size of the change in market concentration or by the degree of substitutability between the merging products. Thus, the use of price promotions by the merging firms can be viewed as a mitigating factor by the antitrust authorities.

Suggested Citation

  • Maxim Sinitsyn, 2020. "Evaluating horizontal mergers in the presence of price promotions," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 39-60, March.
    • Handle: RePEc:kap:qmktec:v:18:y:2020:i:1:d:10.1007_s11129-019-09213-7
    DOI: 10.1007/s11129-019-09213-7
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    References listed on IDEAS

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    1. Nie, Pu-yan & Wang, Chan & Wen, Hong-xing, 2021. "Horizontal mergers under uniform resource constraints," Journal of Retailing and Consumer Services, Elsevier, vol. 63(C).
    2. Mark Armstrong & John Vickers, 2023. "Multibrand Price Dispersion," Economics Series Working Papers 1029, University of Oxford, Department of Economics.

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    More about this item

    Keywords

    Horizontal mergers; Price promotions; Consumer welfare; Product line pricing;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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