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Divisionalization and Horizontal Mergers in a Vertical Relationship

20 Pages Posted: 27 Apr 2009  

Tomomichi Mizuno

Faculty of Economics, University of Nagasaki

Abstract

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).

Suggested Citation

Mizuno, Tomomichi, Divisionalization and Horizontal Mergers in a Vertical Relationship. The Manchester School, Vol. 77, Issue 3, pp. 317-336, June 2009. Available at SSRN: https://ssrn.com/abstract=1378394 or http://dx.doi.org/10.1111/j.1467-9957.2009.02099.x

Tomomichi Mizuno (Contact Author)

Faculty of Economics, University of Nagasaki ( email )

123
Kawashimo-cho
Sasebo-city, Nagasaki 858-8580
Japan

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