A General Model to Assess Unilateral Price Effects of Horizontal Mergers with Vertical Relations
15 Pages Posted: 16 Nov 2017
Date Written: November 14, 2017
Horizontal mergers sometimes involve changes in vertical relations between merging firms as well as between merging and non-merging firms. Vertically integrated non-merging firms may for instance lose sales to independent downstream firms if a downstream firm is acquired by another vertically integrated firm. Thus, the price response from outside firms could go in the opposite direction of that of the merging parties. Consequently, estimates of unilateral price effects are incorrect if these structural changes are not accounted for. We extend the standard framework of unilateral price effects with linear demand to account for any change in vertical ties between firms following a merger in an n product market.
Keywords: Merger Analysis, Antitrust, Unilateral Effects, Vertical Restrictions
JEL Classification: L11, L13, L42
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