Divisionalization and Horizontal Mergers in a Vertical Relationship
Faculty of Economics, University of Nagasaki
The Manchester School, Vol. 77, Issue 3, pp. 317-336, June 2009
In this paper we evaluate the effects of horizontal mergers in a vertical relationship. Each downstream firm can create autonomous divisions. We show that an infinitesimal merger of downstream firms may exhibit a positive welfare effect if the upstream and downstream sectors are sufficiently unconcentrated. However, any merger of upstream firms reduces social welfare. Moreover, a decrease in the concentration in the upstream stage (respectively downstream stage or non-merging stage) makes the welfare effects of the merger in the upstream stage (respectively downstream stage or non-merging stage) less negative (respectively ambiguous or ambiguous).
Number of Pages in PDF File: 20
Date posted: April 27, 2009
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