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Anticompetitive Vertical Merger Waves

Author

Listed:
  • Johan Hombert

  • Jérôme Pouyet

  • Nicolas Schutz

Abstract

We develop a model of vertical merger waves and use it to study the optimal merger policy. As a merger wave can result in partial foreclosure, it can be optimal to ban a vertical merger that eliminates the last unintegrated upstream firm. Such a merger is more likely to worsen market performance when the number of downstream firms is large relative to the number of upstream firms, and when upstream contracts are nondiscriminatory, linear, and public. On the other hand, the optimal merger policy can be non-monotonic in the strength of synergies or in the degree of downstream product differentiation.

Suggested Citation

  • Johan Hombert & Jérôme Pouyet & Nicolas Schutz, 2019. "Anticompetitive Vertical Merger Waves," CRC TR 224 Discussion Paper Series crctr224_2019_084, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2019_084
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp084
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    Cited by:

    1. Liu, Xingyi, 2016. "Vertical integration and innovation," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 88-120.
    2. Pouyet, Jérôme & Hombert, Johan & Schutz, Nicolas, 2007. "Wholesale Markets in Telecommunications," CEPR Discussion Papers 6224, C.E.P.R. Discussion Papers.
    3. Izak Atiyas & Toker Doganoglu & Firat Inceoglu, 2021. "Upstream Competition with Complex and Unobservable Contracts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(3), pages 399-429, May.
    4. Johan Hombert & Jérôme Pouyet & Nicolas Schutz, 2019. "Anticompetitive Vertical Merger Waves," Journal of Industrial Economics, Wiley Blackwell, vol. 67(3-4), pages 484-514, September.
    5. Pouyet, Jérôme & Thomas, Trégouët, 2021. "The Competitive Effects of Vertical Integration in Platform Markets," CEPR Discussion Papers 16545, C.E.P.R. Discussion Papers.
    6. Jérôme Pouyet & Thomas Trégouët, 2016. "Vertical Mergers in Platform Markets," Working Papers halshs-01410077, HAL.
    7. Francisco Gildemir Ferreira da Silva & Renata Lúcia Magalhães de Oliveira & Marin Marinov, 2020. "An Analysis of the Effects on Rail Operational Efficiency Due to a Merger between Brazilian Rail Companies: The Case of RUMO-ALL," Sustainability, MDPI, vol. 12(12), pages 1-23, June.
    8. Christos Constantatos & Ioannis Pinopoulos, 2013. "Accommodation effects in successive Cournot Oligopolies," Discussion Paper Series 2013_06, Department of Economics, University of Macedonia, revised Dec 2013.

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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