Endogenous Merger Waves in Vertically Related Industries
25 Pages Posted: 24 Nov 2011 Last revised: 30 Nov 2011
Date Written: October 1, 2011
We study merger waves in vertically related industries where firms can engage in both vertical and horizontal mergers. Even though any individual merger would have been profitable, firms may refrain from merging for fear of negative impacts from other mergers. When they do merge, however, they always merge in waves, which is either vertical or horizontal depending on the relative intensity of double markup and horizontal competitions in the two industries. Finally, merger waves may happen with or without any fundamental change in the underlying economic conditions.
Keywords: merger wave, horizontal mergers, vertical mergers, stable market structure
JEL Classification: L13, L42, D43
Suggested Citation: Suggested Citation