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Mix‐and‐match divestitures and merger harm

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  • Simon Loertscher
  • Leslie M. Marx

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

  • Simon Loertscher & Leslie M. Marx, 2019. "Mix‐and‐match divestitures and merger harm," The Japanese Economic Review, Japanese Economic Association, vol. 70(3), pages 346-366, September.
    • Handle: RePEc:bla:jecrev:v:70:y:2019:i:3:p:346-366
    DOI: 10.1111/jere.12237
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