Daniel P. O'Brien () (Federal Trade Commission) Greg Shaffer () (University of Rochester)
Abstract
We examine the output and profit effects of horizontal mergers between differentiated upstream firms in an intermediate-goods market served by a downstream monopolist. If the merged firm can bundle, transfer pricing is efficient before and after the merger. Absent cost efficiencies, consumer and total welfare do not change. If the merged firm cannot bundle and its bargaining power is sufficiently high, transfer pricing is inefficient after the merger. Absent cost efficiencies, welfare typically falls. We evaluate the profit effects of mergers for the case of two-part tariff contracts. Rival firms gain (lose) from mergers that raise (lower) downstream prices. Contrary to conventional wisdom, a merger that harms the retailer may increase welfare. Ordering information: This article can be ordered from https://pubs3.rand.org/cgi-bin/rje/pdf.cgi.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.