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Forward Contracting and the Welfare Effects of Mergers

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  • Nathan H. Miller

    (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)

Abstract

I extend the oligopoly model of Allaz and Vila (1993) to explore how forward contracting affects the adverse welfare consequences of horizontal mergers. I derive a welfare statistic that, within the context of the model, is free of structural parameters. The statistic allows for conclusions that generalize across different cost and demand conditions. I then show that exogenous forward contracting mitigates welfare loss but that endogenous forward contracting exacerbates welfare loss provided the relevant industry is sufficiently concentrated.

Suggested Citation

  • Nathan H. Miller, 2013. "Forward Contracting and the Welfare Effects of Mergers," EAG Discussions Papers 201301, Department of Justice, Antitrust Division.
    • Handle: RePEc:doj:eagpap:201301
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    File URL: https://www.justice.gov/atr/public/eag/296846a.html
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    Cited by:

    1. David P. Brown & Andrew Eckert, 2017. "Electricity market mergers with endogenous forward contracting," Journal of Regulatory Economics, Springer, vol. 51(3), pages 269-310, June.
    2. David P. Brown & Andrew Eckert, 2018. "Analyzing the Impact of Electricity Market Structure Changes and Mergers: The Importance of Forward Commitments," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(1), pages 101-137, February.

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