Year: 2024
Type: article
Abstract: The typical concern about vertical mergers is the foreclosure of downstream rivals. In a vertically related industry where downstream firms have a common supplier, margins can reveal whether upstream competition constrains that supplier. I develop a test (based on margins) to identify whether the supplier is constrained premerger and, consequently, cannot raise input prices postmerger. However, even without foreclosure in equilibrium, vertical mergers can harm consumers. Vertical mergers increase consumer prices and benefit all firms, including downstream rivals, when downstream (horizontal) competition weakens sufficiently. This theory of harm differs from typical theories, which pit the merged entity against downstream rivals.
DOI: 10.1111/jems.12611
Author: Alessandro S. Kadner‐Graziano
Institution: University of Bayreuth
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,090
OpenAlex ID: W4402169074