Anticompetitive Vertical Merger Waves

33 Pages Posted: 16 Apr 2019

See all articles by Johan Hombert

Johan Hombert

HEC Paris - Finance Department

Jerome Pouyet

ESSEC Business School

Nicolas Schutz

University of Mannheim

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Date Written: April 2019

Abstract

We develop a model of vertical merger waves and use it to study the optimal merger policy. As a merger wave can result in partial foreclosure, it can be optimal to ban a vertical merger that eliminates the last unintegrated upstream firm. Such a merger is more likely to worsen market performance when the number of downstream firms is large relative to the number of upstream firms, and when upstream contracts are non-discriminatory, linear, and public. On the other hand, the optimal merger policy can be non-monotonic in the strength of synergies or in the degree of downstream product differentiation.

Suggested Citation

Hombert, Johan and Pouyet, Jerome and Schutz, Nicolas, Anticompetitive Vertical Merger Waves (April 2019). CEPR Discussion Paper No. DP13671, Available at SSRN: https://ssrn.com/abstract=3372870

Johan Hombert (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Jerome Pouyet

ESSEC Business School

Nicolas Schutz

University of Mannheim ( email )

D-68131 Mannheim
Germany

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