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Equilibrium mergers in a composite good industry with efficiencies

Author

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  • PARDO-GARCIA, Christina

    (Department of Applied Economics, University of Valencia, Spain)

  • SEMPERE-MONERRIS, Jose J.

    (Department of Economic Analysis and ERI-CES, University of Valencia, Spain; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Abstract

This paper studies equilibrium merging behavior in composite good industries. Component producers face the option to either merge with a similar component producer (horizontal merger) or a complementary one (complementary merger) of a composite good. Focusing only on strategic reasons, complementary mergers arise at equilibrium only when composite goods are very differentiated while horizontal mergers otherwise. Next, when efficiencies are considered, the level of marginal cost saving required for a horizontal merger in a composite industry to result in a non- increase in the upward price pressure index (UPPI) is greater as compared with the one in a regular industry. This result can be used by antitrust authorities to be more demanding when dealing with horizontal mergers in composite goods industries.

Suggested Citation

  • PARDO-GARCIA, Christina & SEMPERE-MONERRIS, Jose J., 2013. "Equilibrium mergers in a composite good industry with efficiencies," LIDAM Discussion Papers CORE 2013067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2013067
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    Cited by:

    1. Jéssica Dutra & Tarun Sabarwal, 2020. "Antitrust analysis with upward pricing pressure and cost efficiencies," PLOS ONE, Public Library of Science, vol. 15(1), pages 1-31, January.
    2. Chernenko, Natalya & Moiseienko, Tetiana & Korohodova, Olena & Hlushchenko, Yaroslava, 2021. "Analysis of mergers and acquisitions between 2009 and 2020," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 30(4), pages 1-18.
    3. KORNEK, Urik & LESSMANN, Kai & TULKENS, Henry, 2014. "Transferable and non transferable utility implementations of coalitional stability in integrated assessment models," LIDAM Discussion Papers CORE 2014035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Álvarez-SanJaime, Óscar & Cantos-Sanchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, Jose J., 2020. "Pricing and infrastructure fees in shaping cooperation in a model of high-speed rail and airline competition," Transportation Research Part B: Methodological, Elsevier, vol. 140(C), pages 22-41.

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    More about this item

    Keywords

    composite goods; substitutes; complements; horizontal merger; complementary merger; efficiency effects; UPPI; diversion ratio;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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