Horizontal Merger for Bargaining Position: Relative Size, Absolute Size, and Bargaining Power Effects
7 Pages Posted: 12 Jan 2005
Date Written: July 11, 2004
We construct a simultaneous bilateral bargaining model and demonstrate analytically that if bargaining power is any constant across a group of buyers, then bargaining position will not be improved through merger in the absence of relative size effects. However, differences in post-merger bargaining power can generate significant positive differences in post-merger bargaining position, a result that should be of interest to regulators.
Keywords: Bargaining Power, Relative Firm Size, Absolute Firm Size, Horizontal Merger
JEL Classification: L41, L50, L51, L82, Z10
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