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Mix-and-Match Divestitures and Merger Harm

Author

Listed:
  • Simon Loertscher

    (University of Melbourne)

  • Leslie M. Marx

    (Duke University)

Abstract

We consider the effects of a merger combined with a divestiture that mixes and matches the assets of the two pre-merger suppliers into one higher-cost and one lower-cost post-merger supplier. Such mix-and-match transactions leave the number of suppliers in a market unchanged but, as we show, can be procompetitive or anticompetitive depending on whether buyers are powerful and on the extent of outside competition. A powerful buyer can benefit from a divestiture that creates a lower-cost supplier, even if it causes the second-lowest cost to increase. In contrast, a buyer without power is always harmed by a weakening of the competitive constraint on the lowest-cost supplier.

Suggested Citation

  • Simon Loertscher & Leslie M. Marx, 2019. "Mix-and-Match Divestitures and Merger Harm," The Japanese Economic Review, Springer, vol. 70(3), pages 346-366, September.
    • Handle: RePEc:spr:jecrev:v:70:y:2019:i:3:d:10.1111_jere.12237
    DOI: 10.1111/jere.12237
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    D44; D82; L41;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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