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Vertical or Horizontal: Endogenous Merger Waves in Vertically Related Industries

Author

Listed:
  • Yao Zhiyong

    (School of Management, Fudan University, Room 236, Siyuan Building, 670 Guoshun Road, Shanghai 200433, China)

  • Zhou Wen

    (Faculty of Business and Economics, The University of Hong Kong, Pokfulam Road, Hong Kong, China)

Abstract

Endogenous merger waves are studied in vertically related industries where firms may engage in both vertical and horizontal mergers. It is shown that whether and how firms merge depends crucially on the balance between vertical and horizontal externalities, and the balance between upstream and downstream competition. Furthermore, firms may merge with or without any fundamental change in the underlying economic conditions.

Suggested Citation

  • Yao Zhiyong & Zhou Wen, 2015. "Vertical or Horizontal: Endogenous Merger Waves in Vertically Related Industries," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1237-1262, July.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:3:p:1237-1262:n:15
    DOI: 10.1515/bejeap-2014-0165
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    References listed on IDEAS

    as
    1. Ali Hortaçsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Journal of Political Economy, University of Chicago Press, vol. 115(2), pages 250-301.
    2. Toxvaerd, Flavio, 2008. "Strategic merger waves: A theory of musical chairs," Journal of Economic Theory, Elsevier, vol. 140(1), pages 1-26, May.
    3. Sven-Olof Fridolfsson & Johan Stennek, 2005. "Why Mergers Reduce Profits And Raise Share Prices-A Theory Of Preemptive Mergers," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1083-1104, September.
    4. Harford, Jarrad, 2005. "What drives merger waves?," Journal of Financial Economics, Elsevier, vol. 77(3), pages 529-560, September.
    5. Giovannetti Emanuele, 2005. "Diagonal Mergers and Foreclosure in the Internet," Review of Network Economics, De Gruyter, vol. 4(1), pages 1-30, March.
    6. Martynova, Marina & Renneboog, Luc, 2008. "A century of corporate takeovers: What have we learned and where do we stand?," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2148-2177, October.
    7. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May.
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    Cited by:

    1. Akio Kawasaki & Tomomichi Mizuno & Kazuhiro Takauchi, 2023. "Downstream new product development and upstream process innovation," Journal of Economics, Springer, vol. 140(3), pages 209-231, December.

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    More about this item

    Keywords

    merger waves; endogenous mergers; vertical mergers; horizontal mergers; stable market structure;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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