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Unilateral Effects of Horizontal Mergers with Vertical Relations Between Firms and Other Structural Market Changes

Author

Listed:
  • Magne K. Asphjell

    (Oslo Economics)

  • Harald N. Bergh

    (Oslo Economics)

  • Tyra Merker

    (Oslo Economics)

  • Jostein Skaar

    (Oslo Economics)

Abstract

If one firm buys inputs from a competitor, the input price may be used to internalize the competition between the firms. Thus, positive unilateral pricing effects may arise if one firm starts to buy inputs from a competitor. Conversely, unilateral pricing effects may be small if two firms with vertical relations merge, as pre-merger competition is partly internalized through the input price. We present a method for adjusting the formula of Hausman et al. (Econ Lett 111(2):119–121, 2011), in order to predict correct unilateral pricing effects not only for horizontal mergers, but also for structural changes in markets where one firm sells inputs to a rival.

Suggested Citation

  • Magne K. Asphjell & Harald N. Bergh & Tyra Merker & Jostein Skaar, 2017. "Unilateral Effects of Horizontal Mergers with Vertical Relations Between Firms and Other Structural Market Changes," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(3), pages 381-394, November.
    • Handle: RePEc:kap:revind:v:51:y:2017:i:3:d:10.1007_s11151-017-9566-z
    DOI: 10.1007/s11151-017-9566-z
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    References listed on IDEAS

    as
    1. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
    2. Robert Willig, 2011. "Unilateral Competitive Effects of Mergers: Upward Pricing Pressure, Product Quality, and Other Extensions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 19-38, August.
    3. Werden, Gregory J, 1996. "A Robust Test for Consumer Welfare Enhancing Mergers among Sellers of Differentiated Products," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 409-413, December.
    4. Hausman, Jerry & Moresi, Serge & Rainey, Mark, 2011. "Unilateral effects of mergers with general linear demand," Economics Letters, Elsevier, vol. 111(2), pages 119-121, May.
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    Cited by:

    1. Trost, Michael, 2018. "The whole is greater than the sum of its parts: Pricing pressure indices for mergers of vertically integrated firms," Hohenheim Discussion Papers in Business, Economics and Social Sciences 06-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    2. Harald Nygård Bergh & Arne Rogde Gramstad & Jostein Skaar, 2020. "Unilateral Price Effects and Vertical Relations Between Merging and Non-merging Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(1), pages 131-143, August.
    3. Michael Trost, 2021. "Is the Whole Greater than the Sum of Its Parts? Pricing Pressure Indices for Mergers of Vertically Integrated Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(2), pages 235-262, March.

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    More about this item

    Keywords

    Merger analysis; Unilateral effects; Vertical restrictions;
    All these keywords.

    JEL classification:

    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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