Vertical Merger, Collusion, and Disruptive Buyers

22 Pages Posted: 17 Mar 2010  

Volker Nocke

University of Mannheim - Department of Economics

Lucy White

Centre for Economic Policy Research (CEPR); Boston University - Department of Finance & Economics

Date Written: March 2010

Abstract

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.

Keywords: antitrust, collusion, merger guidelines, vertical integration, vertical merger

JEL Classification: L13, L40

Suggested Citation

Nocke, Volker and White, Lucy, Vertical Merger, Collusion, and Disruptive Buyers (March 2010). CEPR Discussion Paper No. DP7722. Available at SSRN: https://ssrn.com/abstract=1573426

Volker Nocke

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

HOME PAGE: http://nocke.vwl.uni-mannheim.de

Lucy White

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Boston University - Department of Finance & Economics ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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