Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, December 22, 2011

Endogenous Merger Waves in Vertically Related Industries

Posted by D. Daniel Sokol

Zhiyong Yao (Department of Industrial Economics, School of Management, Fudan University) and Wen Zhou (School of Business, The University of Hong Kong) describe Endogenous Merger Waves in Vertically Related Industries.

ABSTRACT: We study merger waves in vertically related industries where firms can engage in both vertical and horizontal mergers. Even though any individual merger would have been profitable, firms may refrain from merging for fear of negative impacts from other mergers. When they do merge, however, they always merge in waves, which is either vertical or horizontal depending on the relative intensity of double markup and horizontal competitions in the two industries. Finally, merger waves may happen with or without any fundamental change in the underlying economic conditions.

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