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Upstream Merger in a Successive Oligopoly: Who Pays the Price?

64 Pages Posted: 10 Jan 2014  

Øivind Anti Nilsen

Norwegian School of Economics (NHH) - Department of Economics; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Lars Sorgard

Norwegian School of Economics and Business Administration (NHH); Norwegian School of Economics (NHH) - Department of Economics

Simen Ulsaker

Norwegian School of Economics (NHH) - Department of Economics

Date Written: December 13, 2013

Abstract

This study develops and uses a successive oligopoly model, with an unobservable non-linear tariff between upstream and downstream firms, to analyze the possible anti-competitive effects of an upstream merger. We find that an upstream merger may lead to higher average prices paid by downstream firms, but that there is no change in the prices paid by consumers. The model is tested empirically on data for an upstream merger in the Norwegian food sector (specifically, the market for eggs). Consistent with the theoretical predictions of the model, we find that the merger had no effect on consumer prices, but led to higher average prices from the downstream to the upstream firm.

Keywords: Upstream merger, non-linear prices, Vertical contracts

JEL Classification: K21, L41

Suggested Citation

Nilsen, Øivind Anti and Sorgard, Lars and Ulsaker, Simen, Upstream Merger in a Successive Oligopoly: Who Pays the Price? (December 13, 2013). NHH Dept. of Economics Discussion Paper No. 17/2013. Available at SSRN: https://ssrn.com/abstract=2377160 or http://dx.doi.org/10.2139/ssrn.2377160

Oivind Anti Nilsen (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5045 Bergen
Norway

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Lars Sorgard

Norwegian School of Economics and Business Administration (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 5 595 9723 (Phone)
+47 5 595 9543 (Fax)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Simen Ulsaker

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

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