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Upstream Horizontal Mergers, Bargaining and Vertical Contracts

Author

Listed:
  • Chrysovalantou Miliou

    (Department of Economics, Universidad Carlos III de Madrid, Calle Madrid 126, Getafe (Madrid))

  • Emmanuel Petrakis

    (Department of Economics, University of Crete, Greece)

Abstract

Contrary to the seminal paper of Horn and Wolinsky (1988), we demonstrate that upstream firms, which sell their products to competing downstream firms, do not always have incentives to merge horizontally. In particular, we show that when bargaining takes place over two-part tariffs, and not over wholesale prices, upstream firms prefer to act as independent suppliers rather than as a monopolist supplier. Moreover, we show that horizontal mergers can be procompetitive, even in the absence of efficiency gains.

Suggested Citation

  • Chrysovalantou Miliou & Emmanuel Petrakis, 2005. "Upstream Horizontal Mergers, Bargaining and Vertical Contracts," Working Papers 0509, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:0509
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    File URL: http://economics.soc.uoc.gr/wpa/docs/UHMergers.pdf
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    References listed on IDEAS

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    7. Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, vol. 49(3), pages 717-743, April.
    8. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
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    13. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
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    Citations

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    Cited by:

    1. Milliou, Chrysovalantou & Petrakis, Emmanuel, 2007. "Upstream horizontal mergers, vertical contracts, and bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 963-987, October.
    2. Lommerud, Kjell Erik & Olsen, Trond E. & Straume, Odd Rune, 2006. "Cross border mergers and strategic trade policy with two-part taxation: is international policy coordination beneficial? [Grenzüberschreitende Fusionen und strategische Handelspolitik mit zweiseiti," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-24, WZB Berlin Social Science Center.
    3. George Symeonidis, 2008. "Downstream Competition, Bargaining, and Welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 247-270, 03.

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    More about this item

    Keywords

    horizontal mergers; bargaining; vertical relations; two-part tariffs; wholesale;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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