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Market Structure, Bargaining, and Technology Choice

Listed author(s):
  • Roman Inderst
  • Christian Wey

The first part of this paper analyzes the impact of horizontal mergers of suppliers or retailers on their respective bargaining power. In contrast to previous approaches, we suppose that parties resolve the bargaining problem efficiently. Moreover, by ensuring that demand is independent at all retailers we exclude monopolization effects. We find that downstream mergers are more likely (less likely) if suppliers have increasing (decreasing) unit costs, while upstream mergers are more likely (less likely) if goods are substitutes (complements). In both cases a merger enables the involved parties to gain access to inframarginal rents. In the second part of the paper we explore how the role of bargaining power affects technology choice under different market structures. We isolate two effects. First, if retailers are non-integrated, suppliers focus disproportionately more on inframarginal cost reduction. Second, this bias is mitigated if goods are substitutes and suppliers are non-integrated as competition exerts a disciplining force. ZUSAMMENFASSUNG - (Horizontale Unternehmenszusammenschlüsse, Verhandlungen und die Wahl der Produktionstechnologie) Der erste Teil des Aufsatzes zeigt, wie sich horizontale Zusammenschlüsse zwischen Produzenten und Einzelhändlern auf die Verhandlungsmacht der Vertragsparteien auswirken. Im Gegensatz zu vorhergehenden Ansätzen nehmen wir an, daß die Parteien ihre Verhandlungsprobleme effizient lösen. Des weiteren unterstellen wir, daß die Einzelhändler Märkte bedienen, die unabhängig voneinander sind, wodurch Monopolisierungsvorteile ausgeschlossen werden. Unsere Ergebnisse zeigen, daß Einzelhändler einen Zusammenschluß favorisieren, wenn die Stückkosten der Produzenten mit zunehmender Ausbringungsmenge ansteigen. Umgekehrt sind die gemeinsamen Gewinne unabhängiger Einzelhändler höher als bei einem Zusammenschluß, wenn die Stückkosten der Produzenten fallend verlaufen. Die Produzenten können ihre gemeinsamen Gewinne durch eine Fusion steigern, wenn ihre Erzeugnisse substituierbar sind. Stehen die Güter der Produzenten in einem komplementären Verhältnis zueinander, so ist ein Zusammenschluß nicht vorteilhaft. Diese Ergebnisse sind unabhängig von der Struktur der anderen Marktseite. Allgemein gilt sowohl für die Produzenten als auch für die Einzelhändler, daß ein Zusammenschluß den Zugriff auf inframarginale Renten der anderen Marktseite ermöglicht. Im zweiten Teil der Arbeit untersuchen wir, wie die Berücksichtigung von Verhandlungsmacht die Technologiewahl eines Produzenten bei unterschiedlichen Marktstrukturen beeinflußt. Wir können zwei Effekte isolieren. (1) Produzenten haben einen Anreiz Kosteneinsparungen bei inframarginalen Ausbringungsmengen zu Lasten von höheren Gesamtkosten zu tauschen, wenn die Einzelhändler nicht zusammengeschlossen sind. (2) Diese Verzerrung hin zu einer ineffizienten Technologiewahl wird abgemildert, wenn die Güter substituierbar sind und die Produzenten unabhängig agieren, weil Konkurrenz eine disziplinierende Funktion ausübt.

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Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 00-12.

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Length: 32 pages
Date of creation: Sep 2000
Publication status: Published as a revised version under the title "Bargaining, Mergers, and Technology Choice" in the RAND Journal of Economic , Vol. 34(1), Spring 2003, pp. 1-19.
Handle: RePEc:wzb:wzebiv:fsiv00-12
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  1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
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  8. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
  9. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
  10. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
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  15. Gaudet, Gerard & Salant, Stephen W., 1992. "Mergers of producers of perfect complements competing in price," Economics Letters, Elsevier, vol. 39(3), pages 359-364, July.
  16. Gaudet, Gerard & Salant, Stephen W, 1991. "Increasing the Profits of a Subset of Firms in Oligopoly Models with Strategic Substitutes," American Economic Review, American Economic Association, vol. 81(3), pages 658-665, June.
  17. Byoung Heon Jun, 1989. "Non-cooperative Bargaining and Union Formation," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 59-76.
  18. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-230, March.
  19. Morton I. Kamien & Israel Zang, 1990. "The Limits of Monopolization Through Acquisition," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 465-499.
  20. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
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