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Merger Remedies and Bargaining Power in the Coffee Market

Author

Listed:
  • Yann Delaprez
  • Morgane Guignard

Abstract

This paper analyzes a merger of large manufacturers with divestiture in the French coffee market. In contrast to previous approaches used to study the effects of upstream divestitures on prices and welfare, we model the vertical market structure. First, our results show that the standard policy recommendation to require divestiture to small recipient firms may not hold when asymmetric bargaining power between firms is considered. Second, we show that previous models significantly overestimate costs. We estimate costs that are 41 percent lower, and find that divestiture can lead to marginal cost savings for the buyer of the divested brand.

Suggested Citation

  • Yann Delaprez & Morgane Guignard, 2024. "Merger Remedies and Bargaining Power in the Coffee Market," Discussion Papers of DIW Berlin 2088, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2088
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    File URL: https://www.diw.de/documents/publikationen/73/diw_01.c.905261.de/dp2088.pdf
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    References listed on IDEAS

    as
    1. Gregory S. Crawford & Robin S. Lee & Michael D. Whinston & Ali Yurukoglu, 2018. "The Welfare Effects of Vertical Integration in Multichannel Television Markets," Econometrica, Econometric Society, vol. 86(3), pages 891-954, May.
    2. Gustavo Grullon & Yelena Larkin & Roni Michaely, 2019. "Are US Industries Becoming More Concentrated?," Review of Finance, European Finance Association, vol. 23(4), pages 697-743.
    3. Vanessa Alviarez & Keith Head & Thierry Mayer, 2020. "Global Giants and Local Stars: How Changes in Brand Ownership Affect Competition," Working Papers wp2020_2009, CEMFI.
    4. Céline Bonnet & Pierre Dubois, 2010. "Inference on vertical contracts between manufacturers and retailers allowing for nonlinear pricing and resale price maintenance," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 139-164, March.
    5. repec:hal:spmain:info:hdl:2441/6q707l4svn8k3bt630nhgdqgdu is not listed on IDEAS
    6. repec:hal:wpspec:info:hdl:2441/6q707l4svn8k3bt630nhgdqgdu is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Merger; remedies; divestiture; vertical markets; bargaining power;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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