Mix‐And‐Match Divestitures and Merger Harm

21 Pages Posted: 28 May 2020

See all articles by Simon Loertscher

Simon Loertscher

University of Melbourne - Department of Economics

Leslie M. Marx

Duke University - Fuqua School of Business, Economics Group

Date Written: September 2019

Abstract

We consider the effects of a merger combined with a divestiture that mixes and matches the assets of the two pre‐merger suppliers into one higher‐cost and one lower‐cost post‐merger supplier. Such mix‐and‐match transactions leave the number of suppliers in a market unchanged but, as we show, can be procompetitive or anticompetitive depending on whether buyers are powerful and on the extent of outside competition. A powerful buyer can benefit from a divestiture that creates a lower‐cost supplier, even if it causes the second‐lowest cost to increase. In contrast, a buyer without power is always harmed by a weakening of the competitive constraint on the lowest‐cost supplier.

Suggested Citation

Loertscher, Simon and Marx, Leslie M., Mix‐And‐Match Divestitures and Merger Harm (September 2019). The Japanese Economic Review, Vol. 70, Issue 3, pp. 346-366, 2019, Available at SSRN: https://ssrn.com/abstract=3608195 or http://dx.doi.org/10.1111/jere.12237

Simon Loertscher (Contact Author)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Leslie M. Marx

Duke University - Fuqua School of Business, Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

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