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Cross-Market Mergers with Common Customers: When (and Why) Do They Increase Negotiated Prices?

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  • Enrique Ide

Abstract

I examine the implications of cross-market mergers of suppliers to intermediaries that bundle products for consumers. These mergers are controversial. Some argue that suppliers' products will be substitutes for intermediaries, despite not being substitutes for consumers. Others contend that because bundling makes products complements for consumers, products must be complements for intermediaries. I contribute to this debate by showing that two products can be complements for consumers but substitutes for intermediaries when the products serve a similar role in attracting consumers to purchase the bundle. This result leads to new recommendations and helps explain why cross-market hospital mergers raise prices.

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  • Enrique Ide, 2024. "Cross-Market Mergers with Common Customers: When (and Why) Do They Increase Negotiated Prices?," Papers 2402.12575, arXiv.org.
    • Handle: RePEc:arx:papers:2402.12575
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    1. William P. Rogerson, 2020. "Modelling and predicting the competitive effects of vertical mergers: The bargaining leverage over rivals effect," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(2), pages 407-436, May.
    2. Fernando Luco & Guillermo Marshall, 2020. "The Competitive Impact of Vertical Integration by Multiproduct Firms," American Economic Review, American Economic Association, vol. 110(7), pages 2041-2064, July.
    3. Greenlee, Patrick & Reitman, David & Sibley, David S., 2008. "An antitrust analysis of bundled loyalty discounts," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1132-1152, September.
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