Vertical Merger, Collusion, and Disruptive Buyers
University of Mannheim - Department of Economics
Harvard Business School - Finance Unit; Centre for Economic Policy Research (CEPR)
CEPR Discussion Paper No. DP7722
In a repeated game setting of a vertically related industry, we study the collusive effects of vertical mergers. We show that any vertical merger facilitates upstream collusion, no matter how large (in terms of capacity or size of product portfolio) the integrated downstream buyer. But a vertical merger with a larger buyer helps more to facilitate upstream collusion than a similar merger with a smaller buyer. This formalizes the idea expressed in the U.S. and EU non-horizontal merger guidelines that some downstream buyers may be more "disruptive" of collusive schemes than others.
Number of Pages in PDF File: 22
Keywords: antitrust, collusion, merger guidelines, vertical integration, vertical merger
JEL Classification: L13, L40
Date posted: March 17, 2010
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