Vertical Restraints and the Effects of Upstream Horizontal Mergers

Abstract

The downstream effects of mergers between manufacturers of differentiated consumer products are partly determined by the relationship between the merging manufacturers and retailers. That relationship may be such that the retail price effects of the merger are exactly those if the manufacturers sold directly to consumers, and that relationship may be such that the merger produces similar effects with subtle differences, including the possibility of price decreases for non-merging products. Alternatively, that relationship may be such that consumer prices do not change following a merger, which instead shifts profits to the merged firm.

Keywords: vertical restraints, pass-through, mergers, retailing

JEL Classification: L41, L44