Upward Pricing Pressure in Mergers Where Prices Are Determined Through Joint Bargaining
Year: 2025
Type: article
Abstract: ABSTRACT We develop an upward pricing pressure metric for evaluating mergers when prices are negotiated through bilateral bargaining. Our framework is based on deriving the marginal cost reduction required to just offset a price increase due to a horizontal merger in a Nash‐in‐Nash bargaining equilibrium assuming suppliers negotiate with buyers using an all‐or‐nothing strategy. We assess the accuracy of our framework by applying it to a hospital merger setting, where we conduct Monte Carlo simulations and compare to observed price changes from consummated mergers. We find that our metric offers important advantages over alternative methods and only requires information that is readily available in merger investigations.
Source: Journal of Industrial Economics
DOI: 10.1111/joie.70002
Authors: Keith Brand, Christopher V. Lau
Institution: Federal Trade Commission
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,350
OpenAlex ID: W4411461300